There are so many other things that could be done with this money. I have the privilege of living in the glorious cathedral city of Lincoln. Lincoln does not have regular services to London. There is one train a day from Lincoln to London and one from London to Lincoln. A Lincoln man or woman can have a day in London, but somebody in London cannot have a day in Lincoln. As we approach the octocentenary of Magna Carta, we are going to have great celebrations in Lincoln. It is essential that we have better rail communications. People from London could have a day in Lincoln as they can so easily have a day in York. I am grateful to the Secretary of State for Transport for the personal interest he is taking in this matter. He is a man for whom I have the highest possible regard, as I do for my noble friend who will respond to this debate.

I think we have our priorities misplaced. We should be spending this money on upgrading and perhaps on reinstating some of the lines that were so ill-advisedly taken up in the wake of Beeching. My time is up; this country’s time will be up scenically and in many parts of its beautiful landscape if HS2 goes ahead. I hope and pray that it will not.

8.06 pm

Lord Stevenson of Balmacara: I thank the noble Lord, Lord Truscott, for securing this debate. I declare an interest, as my home is in Little Missenden, which is close to the current preferred route for phase 1. Of course, being a nimby may encourage some others to devalue my comments, but without that close connection, I would probably not have studied the Government’s proposals in the way I have.

I want to make two points. I support investment in our national rail network and I am in favour of introducing a high-speed network for the UK, although I would start in a different place, both literally and

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metaphorically. I would start in the places that actually need high-speed connectivity, such as the south-west, Wales, the north-west of Scotland, and Scotland more generally—a contribution, perhaps, to a united kingdom.

I would insist on interconnectivity with other transport systems. Why on earth does HS2 no longer stop at Heathrow? Why does it not connect properly with HS1, through Stratford and thence to the continent? I would follow existing major transport corridors, such as the M40 from Heathrow to Birmingham, or the M1 through Milton Keynes. I would pay proper regard to areas of ancient woodland and precious areas of natural beauty, even if it means that journey times are slightly extended. I would consult properly on all the possible alternatives so that the best choice is made and I would certainly have a much better compensation scheme.

My second point is about the route through the Chilterns. The presentation of HS2 Ltd of the case for the “Y” route north of Birmingham trumpeted that it,

“avoids national parks, Areas of Outstanding Natural Beauty and registered parks and gardens”.

I welcome this, but it throws into stark relief the fact that the Chilterns is now the only AONB along the entire HS2 route that is adversely affected by the proposed scheme. My local campaign groups, Conserve the Chilterns and Countryside and the Chiltern Ridges HS2 Action Group have suggested a tunnel through the entire Chiltern AONB, which I support. However, HS2 Ltd clearly wants nothing to do with it. It claims it will increase costs by some 10 times the amount that we calculated it would cost but, of course, it will not publish its calculations to prove that.

A continuous full tunnel through the Chiltern AONB would not be necessary if HS2 was routed from Heathrow, up the M40, or through the M1 travel corridor to Milton Keynes. If the Government are intransigent on this, however, the continuous full tunnel would enhance the current phase 1 route because it better protects existing natural assets, meets local concerns, reduces the total phase 1 construction time and saves landscape-related costs of more than £65 million.

The Government should re-consult on the HS2 phase 1 route to allow proper and effective consideration of all alternative options, including those relating to the Chiltern AONB. They should ensure that the Chilterns tunnel proposals are included in the forthcoming environmental impact assessment, or else adopt the Labour Party’s proposals for hubs at Heathrow and Stratford.

8.08 pm

Lord Shipley: My Lords, I am a long-standing supporter of high-speed rail. I served for several years on the Northern Way Transport Compact and we did a lot of work establishing the case for high-speed rail and setting out the positive cost-benefit ratio that could be achieved for the north of England. My contribution this evening comes from that northern perspective, where connectivity for business and growth matters profoundly, for both the speedy movement of people and the movement and export of freight in an increasingly competitive world.

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As several noble Lords have pointed out, we have existing capacity problems, the product of both rising demand and underinvestment. When exploratory work was being done on the case for HS2, my great fear was that debate would become dominated by the route to be chosen between London and Birmingham to the detriment of the production of a wider rail investment plan and the wider benefits to the UK as a whole, which would be glossed over. Therefore, I am glad that the Government have understood the case for HS2, which I think is vital to our country’s economic future. It is not just a matter for the south-east and the Midlands because it will help to rebalance our economy away from overdependence on London and the south-east for tax revenues. That means building an infrastructure which helps Scotland, the north and the Midlands to grow. London currently provides 28% of non-domestic rates income in England with only 15% of our population. That is an unhealthy situation and one that requires a better transport infrastructure to put right.

Critically, HS2 will link northern cities with each other, not just with London and Scotland. The Leeds to Birmingham journey time will be just under one hour versus two hours now, and the journey from Leeds to London will take 82 minutes versus two hours and 12 minutes today. Newcastle will not be connected to the high-speed track in the next phase but when HS2 joins the east coast main line north of Leeds, the journey time from Newcastle to London will be two hours and 18 minutes, as against just under three hours now. There will also be an hour’s saving on the journey time to Birmingham. As a consequence of HS2, there will be greater freight capacity on the system as a whole.

I commend the British Chambers of Commerce, which says that HS2 will create confidence, jobs and prosperity. We cannot go on just patching the system. We need to plan for a full national UK network and, pending that, we need to ensure that we maximise speed north of Leeds and Manchester. The cost, at £33 billion plus rolling stock at £8 billion, should be seen as a 20-year investment. Discussions about cost did not stand in the way of Eurostar or Crossrail. I agree entirely with the comments about the Heathrow connection, but the Government’s vision is right. We can debate the detail of routes, and it is right that we do so, but HS2 remains central to our potential for growth and competitiveness.

8.12 pm

Baroness Wilkins: My Lords, I declare an interest as I was brought up in Amersham and have family and friends living there and in other areas being blighted by this scheme. They are not nimbys but are among the thousands of people throughout the country who have examined the arguments for HS2 and find them utterly unconvincing.

The Government claim that HS2 is in the national interest and that it will serve to bridge the north-south divide. Yet, according to public policy expert, Professor Mike Geddes, that claim has no factual basis, with the likely movement of money and people being towards London rather than back to the north. International studies show that it will just strengthen London’s dominance. HS2 Ltd itself admits that seven out of

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10 of the jobs created for phase 1 will be in London. Far from increasing connectivity between our cities, as the Government claim, some UK cities will have a worse service than at present. The Government are pressing ahead with this project despite the fact that it is based on flawed assumptions and calculations about its costs and benefits. The Public Accounts Committee in the other place has today pointed to the basic errors made by the DfT on the west coast franchising fiasco, which wasted at least £50 million of taxpayers’ money.

One of the most glaring flaws is that more than half the benefit claimed to derive from the shorter journey time—55%—is based on the fallacy that time spent on the train is all wasted. We are in the 21st century, with iPads, mobile phones and the internet. Will the Minister explain why his department ignores the extensive research, let alone the evidence of its own eyes, which shows that business travellers work on the train? Why is his department using out-of-date, 11 year-old data and incorrect assumptions on the value of time? Will he also explain why an outdated forecasting model is being used to project demand? I understand that the old model significantly overstated the growth forecast of long-distance trips, and so inflated the growth in demand for HS2.

I am nearly out of time, but any fair cost-benefit analysis would factor in the cost to the thousands of people whose homes have been blighted by this route, the farms that have been cut in two and the businesses ruined, yet the proposed compensation arrangements are derisory. Overall, less than 2% of blighted homes can hope for compensation. Thousands are trapped, unable to move, or can do so only by accepting large losses. As we have heard, one mortgage provider has valued a property 500 metres from HS2 at nil. I do not deny that the country needs infrastructure building, but it needs to spend £33 billion on houses—and on houses built now to draw a halt to the misery being caused by inflated rents, rocketing house prices and the iniquitous cuts to the housing benefit system. It does not need to blight existing houses, and it does not need HS2.

8.15 pm

Lord Faulkner of Worcester: My Lords, this is a very high-speed debate and I am pleased to have the opportunity to repeat my wholehearted support for High Speed 2. I, too, am going to make just two points.

First, we are not in uncharted territory. HS1 has given us experience of the environmental and social impact of high-speed railways. Noble Lords have recalled the furore that greeted British Rail’s proposals to build the high-speed line across Kent in 1987. Protest groups were formed and scare stories circulated, so why do we not hear more about the environmental and social intrusion of HS1 today? Kent lives happily with its high-speed line, and for the county council and local businesses it is a major asset as it encourages inward investment and visitors. The reason is that the line was engineered carefully to minimise environmental intrusion, as the noble Lord, Lord Freeman, said. The use of tunnels, cuttings and noise barriers all help to reduce the sound, which is low anyway because the new track is laid on deep ballast, and the new trains minimise

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noise that would otherwise be created at the point of contact between wheel and rail. It is far less than that created by motorway traffic, which is intrusive 24 hours a day. Today, the Kent transport network could not function effectively without the high-speed line.

My second point is about how high-speed rail changes the way Britain does business. We tend not to be very good at assessing the benefits of new rail schemes. A cost-benefit approach has been adopted to satisfy the requirement for analysis where public policy or public money is involved. However, cost-benefit appraisals for rail schemes have consistently underestimated the benefits that they bring. The growth in passenger numbers is often achieved much earlier than forecast. Total passenger numbers in 2012 were higher than at any time in our country since 1922, and parts of the railway are already full.

Cost-benefit ratios are only part of the story. The railway will transform the way we do business in Britain. It will offer benefits that we are only beginning to understand, just as it has for high-speed lines in countries all over the world. Its speed will link the south-east economy with other parts of Great Britain and help to encourage economic development in every part that it touches—a point made by the heads of the chambers of commerce in their briefing to us yesterday. It will attract significant numbers of people from road and air, just as Eurostar has between London, Paris and Brussels, and as high-speed rail has in continental Europe. It will release capacity on the classic rail network, which can be used to provide more trains to towns not well served currently, and, in particular, carry more freight.

I congratulate the Government on their commitment to stick to, and indeed expand, what my noble friend Lord Adonis set in train when Secretary of State for Transport, and I hope that they succeed in accelerating the legislative timetable. I want HS2 built in my lifetime, and I want my grandchildren to benefit from the new railway age of the 21st century.

8.19 pm

Lord Rosser: My Lords, I thank the noble Lord, Lord Truscott, for securing this debate, which provides an opportunity to discuss where we are with HS2 and to reiterate the point that, with the continuing growth in passenger and freight traffic, even during a recession, a new route is needed to address the inevitable and imminent line capacity problems, such as those on the west coast main line, where service frequencies are already well in excess of what they were a relatively few years ago.

We fully support the HS2 project, but we are concerned about its progress in the current Parliament. No legislation has been published, and the recent Command Paper suggested that Royal Assent for the Government’s first hybrid Bill would not be achieved until some point in 2015, and not by the time of the next election, as was previously intended. On top of that, the outcome of a judicial review is awaited. Perhaps the Minister could say when the Government expect to receive a judgment, and what impact a ruling against the Government would have on the timescale for the implementation of the HS2 project.

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We have also expressed our concerns about the lack of a dedicated purpose-built link between HS1 and HS2, which would provide the proper links to enable HS2 to serve areas of the continent directly. Concerns have also been expressed that the Government do not propose to connect HS2 with our major city centres in some instances. There is also the issue of how HS2 will connect to Heathrow, which the Government have decided to park on one side pending the outcome of the Davies commission on aviation capacity, which will not report back before 2015. Our preference was to take HS2 directly via Heathrow. Now even the Government’s compromise position of a spur to provide a direct link to Heathrow has been taken off the table, at least for now.

The reality is that this Government are acquiring a reputation for dither and delay when it comes to major transport projects. A decision on airport capacity in the south-east has been put back until after the next general election. Now it looks as though there may be dither and delay over decision-making on HS2, not only as far as links to Heathrow are concerned but also because of apparent uncertainty over whether the Government still intend to pass the necessary legislation for even the first phase of HS2 through Parliament by the time of the general election. If the Government’s commitment to pass legislation in this Parliament still stands, can the Minister say what statutory issues in relation to HS2 that legislation will address?

The Minister owes it to everyone, whether they are supportive of HS2 or not, to clarify the Government’s intended actions with respect to the HS2 project between now and the general election in 2015. I hope that the Minister will respond to these points.

8.22 pm

Earl Attlee: My Lords, I thank the noble Lord, Lord Truscott, for securing this evening’s debate, and I thank other noble Lords for their contributions, some in support and some expressing concern. A project as significant to Britain as HS2 deserves time to debate, and I am happy to try to address questions this evening.

My right honourable friend the Secretary of State for Transport recently set out his initial preferences for the route and station options for phase 2 of the scheme, extending the route north of Birmingham to Manchester and Leeds. This is an important step forward in the project’s development, a step closer to the high-speed rail network that will address the key challenges that Britain will face in rebalancing and rebuilding our economy.

I have previously expressed to this House that I believe passionately in a successful Britain, and HS2 provides a rare opportunity to secure a step change in Britain’s competitiveness. HS2 will generate jobs and rebalance the country’s economy, acting as a catalyst for Britain’s future prosperity. Benefits will accrue right across the UK, leaving a lasting legacy for generations to come. This is a transformational project that will enhance rail capacity, connectivity and reliability, helping to underpin economic growth. HS2 will provide the foundation for a truly national network and connect

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seamlessly to the existing network, serving destinations not directly on the high-speed line such as Liverpool, releasing capacity on the existing main north-south lines to enable additional commuter, regional and, most importantly, freight services to use the line, and creating more space on some existing trains. HS2 will be woven into the transport fabric of the nation. It will be accessible to all and not be just for rich business travellers. The recently proposed routes north of Birmingham offer a great starting point for the consultation process to follow.

The Government are determined to make this an environmentally responsible scheme and have gone to great lengths to listen to those concerned about the environmental effects. While I believe HS2 to be in the national interest, we know that it is not possible to build a railway without any effect on the environment. When designing the route, important considerations such as wildlife habitats must be carefully weighed against other concerns such as protecting as many people’s homes as possible. The Government must make sure that any environmental effects are kept to a minimum and also look for opportunities to benefit the environment along the way, such as the commitment already made to plant 4 million new trees as part of the HS2 project.

Following an environmental impact assessment, the Government will be best placed to understand the effects on the environment and bring forward proposals to make sure that it is protected as far as possible. The initial preferred scheme for phase 2 has been designed to avoid or minimise impacts to important sites, and avoid any national parks or areas of outstanding natural beauty. HS2 Ltd has worked closely with Natural England and the Environment Agency in choosing options and preparing designs that would have no impacts on sites of internationally recognised importance.

Where it is not possible completely to avoid certain areas, mitigating the effects of the line is important. This has been demonstrated through the proposals for the Chilterns area of outstanding natural beauty. Of the 13 miles of route through this area, less than two miles will be at or above the surface. This is more than a 50% increase in tunnel or green tunnel than proposed in the route originally consulted on. Noble Lords have mentioned the charming villages of Little Missenden and Prestwood. I would merely point out that my subsidiary title is Viscount Prestwood.

While a decision on this scale will be made on the basis of the long-term national interest, the economic case for HS2 remains strong. The latest analysis, published in August 2012, shows an estimated £2 of benefits for every £1 spent. As with any assessment of this kind, the economic case will continue to be reviewed and updated through the life of the project. However, the benefit-cost ratio can only ever form one part of the decision-making process for a project of this scale. Wider strategic considerations such as enhancing connectivity and regenerating cities to underpin the rebalancing of the economic geography of this country are clearly compelling cases.

The noble Lord, Lord Rosser, asked about the judicial review case. He will not expect me to say any more than that we expect the judgment shortly. He also challenged me about the progress on the necessary

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hybrid Bill. He will understand that to design the necessary powers, every piece of land needed has to be specified in the Bill. The process has to be done properly and will just have to take its time.

The noble Lord, Lord Truscott, pressed me hard on the issue of compensating those affected, and he was not the only noble Lord to do so. The Government are conscious that no major infrastructure project on the scale of HS2 can be built without an impact on local communities, as well as the disabled. However, just as the Government are committed to mitigating the environmental impacts, I should like to reassure noble Lords that the Government are equally committed to addressing the impacts on local communities affected by the route. For this reason, for phase 1, the package of measures that have been consulted on goes significantly beyond what is provided for in law, including, for example, a promise to buy all owner-occupied homes in a corridor that in rural areas is 240 metres wide. The responses to this consultation are being carefully considered, and the Government expect the final package to be in operation in the spring. Meanwhile, the exceptional hardship scheme for phase 1 remains operational, and offers have been made to buy more than 100 homes at their full unblighted value.

The Government are currently consulting on an exceptional hardship scheme for phase 2—a consultation that closes on 29 April—and will later consult on a full package of compensation measures for phase 2. Furthermore, the Government are determined to compensate for disruption and effects caused by the new railway, and have been working for years with community groups, local businesses and wildlife charities.

The noble Lord, Lord Truscott, talked about the problem of ancient woodlands. They are very important to our natural heritage; however, the Government have to strike a balance between a range of important considerations for HS2, such as the location of people’s homes as well as other environmental and heritage sites. We are doing everything possible to minimise the impact on ancient woodlands, but where this is unavoidable we will provide suitable mitigation and compensation, following the best practice recommended by ecologists. However, I fully understand the special status of an ancient woodland. As part of the HS2 project, the Government have already committed to planting 4 million new trees and we will also be looking at opportunities to enhance existing, or create new, woodland areas and wildlife habitats.

The noble Baroness, Lady Campbell of Surbiton, made important points about the impact of the construction project on disabled people. I understand her points. During the passage through the House under the hybrid Bill procedure, the noble Baroness will have a greater opportunity to raise her concerns. However, I gently point out that hers was an argument against any large-scale transport project, and not just against HS2.

Many noble Lords who spoke against the project claimed that there was no economic case for HS2. I disagree. The latest analysis, published in August 2012, shows a continued, strong economic case for proceeding with this strategically important scheme. It shows an estimated benefit-cost ratio for the Y network of

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around 2.5, including wider economic impacts. However, the economic case can form only one part of the decision-making process for a project of this scale, as its benefits go well beyond narrow transport economics. The Government remain convinced that HS2 is the best means of avoiding gridlock on our railways, and delivering the required step-changing capacity and performance of Britain’s intercity rail network to support economic prosperity over the long term. It will cost us more in the long term if we do not make the right decision now.

The noble Lord, Lord Truscott, pointed out that there are potential improvement schemes that have a BCR of 5:1. I do not deny this. However, one can run these schemes but at the end of the day still run out of capacity on the west coast main line. The noble Lord, Lord Adonis, made much the same point. He also made a very important point about the pessimism of the BCR and the difficulty of capturing the full benefit. I am very grateful for his wise comments, and I agree with everything that he said.

My noble friend Lord Freeman raised the issue of HS1. There are advantages to integrating the two high-speed rail lines. There is a strong strategic case for ensuring that a high-speed network in this country connects directly into the many thousands of miles of network in operation across Europe. I welcome the recognition by my noble friend Lord Freeman of the benefits that providing links with international gateways, such as HS1, can bring. My noble friend Lord Bradshaw also touched on HS1-HS2 connectivity.

The noble Lord, Lord Stevenson, raised the issue of why HS2 no longer stops at Heathrow. The spur has not been cancelled; it has been paused, and it is too early to predict the outcome of the airport’s commissioned work or of any decisions taken following that. There are no plans to slow down progress on phase 1, and we need to press on quickly with it so that we can deliver the wider economic benefits that high-speed rail can bring. The noble Lord, Lord Stevenson, also asked a question about where to build a high-speed railway. The main driver of where to build a new railway is the business case, and this is heavily influenced by the capacity constraints on the classic railway network. It is important to point out that eight of 10 UK cities will be connected by high-speed rail.

The right reverend Prelate the Bishop of Liverpool asked if HS2 could go to Liverpool. It is important to understand that trains will be able to run on HS2 and then on the classic network, so that the people of Liverpool will still get the benefits of HS2, as will the people of Scotland; everyone north of London will gain the benefits.

Unfortunately, I have run out of time. Where I have not managed to respond to noble Lords I will of course write. I am also hosting a presentation on HS2 shortly, and I would be delighted to see as many noble Lords as possible attend.

I reassure the House that the Government will continue to listen to those concerned about the impact of the scheme. HS2 is about helping Britain thrive and prosper. Tough decisions have to be taken, but they will be responsible decisions taken in the interest of making Britain better and stronger.

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8.35 pm

Sitting suspended.

Enterprise and Regulatory Reform Bill

Report (1st Day) (Continued)

8.39 pm

Amendments 47 and 48 not moved

Amendment 49

Moved by Viscount Younger of Leckie

49: Schedule 4, page 108, line 44, after “20” insert “(3)”

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie): My Lords, the smooth transition from the current competition authorities to the new CMA will be essential to ensure that competition enforcement and consumer protection are not undermined. Amendments 49, 50, 55 and 88 are minor and technical, and seek to assist with that process.

Amendment 49 amends Schedule 4 to make clear that the CMA will not be required to publish certain reports, such as an annual plan or concurrency report in relation to the period before it takes its competition and consumer functions. Amendment 50 makes it clear that when a member of the Competition Commission panel is also appointed to the CMA panel during the transitional period, the period when he or she holds both appointments will not be double counted. The Bill requires that the total length of the two appointments must not exceed eight years.

Amendments 55 and 88 add a new clause which seeks to allow the OFT and Competition Commission to consult on behalf of the CMA on, among other things, new guidance before the CMA becomes fully operational, and make clear that this new clause comes into force on Royal Assent. This is a time-limited provision that seeks to enable full and timely consultation on guidance, rules, statements of policy and other matters relating to competition reforms in the Bill. I beg to move.

Lord Whitty: I certainly have no objection to any of these amendments. The Minister referred to a smooth transition. There is one other aspect necessary for a smooth transition to which we referred earlier: greater clarity about those OFT functions which are going outside of the CMA. Clarity on this is necessary over and above what is provided in the Public Bodies Act orders, which we are about to consider. I would be grateful if the Minister could confirm that there will be a further White Paper on the consumer landscape. I know he cannot confirm that there will be a consumer Bill in the next session—he cannot pre-empt the Queen’s Speech—but I assume that Government policy is moving in that general direction. With those caveats, I am fully in support of the amendments.

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Viscount Younger of Leckie: As noble Lords will note, these amendments, while minor and technical, are vital to the smooth transition to creating the CMA, notwithstanding the noble Lord’s comments, and ensuring that competition enforcement and consumer protection remain at the forefront of activity. The Department for Business, Innovation and Skills is working closely with the Competition Commission and the OFT to allow for this smooth transition to the new authority, including the development of guidance for business. These amendments will assist in that process. To conclude, the noble Lord, Lord Whitty, may not be surprised to hear that I cannot commit further to future consumer issues or Bills, but I fully note his comments.

Amendment 49 agreed.

Amendment 50

Moved by Viscount Younger of Leckie

50: Schedule 4, page 109, line 17, after “Commission” insert “(excluding any period when he or she also holds office as a member of the CMA panel)”

Amendment 50 agreed.

Schedule 5 : Amendments related to Part 3

Amendment 51 not moved.

Schedule 6 : Regulatory appeals etc: minor and consequential amendments

Amendment 52

Moved by Viscount Younger of Leckie

52: Schedule 6, page 176, line 33, at end insert—

“( ) In paragraph 7, in sub-paragraph (3), for “Competition Commission” substitute “Competition and Markets Authority”.”

Amendment 52 agreed.

Clause 22 : Transfer schemes

Amendments 53 and 54 not moved.

Amendment 55

Moved by Viscount Younger of Leckie

55: After Clause 22, insert the following new Clause—

“Transitional provision: consultation

(1) This section applies in relation to a provision of this Act under or by virtue of which the CMA has a function of consulting another person in preparing rules, statements of policy, guidance or general advice or information.

(2) At any time before the provision comes into force, the Office of Fair Trading or the Competition Commission or both bodies acting jointly—

(a) may carry out any consultation that the CMA would have power to carry out after the provision comes into force, and

(b) for that purpose, may prepare drafts of any documents to which the consultation relates.

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(3) At any time after the provision comes into force, the CMA may elect to treat any consultation carried out or other thing done under subsection (2) by the Office of Fair Trading or the Competition Commission (or by both bodies acting jointly) as carried out or done by the CMA.

(4) The Secretary of State may direct the Office of Fair Trading or the Competition Commission, or both of them acting jointly, to exercise a power conferred by subsection (2).”

Amendment 55 agreed.

8.45 pm

Clause 41 : Cartel offence

Amendment 56

Moved by Lord Whitty

56: Clause 41, page 38, line 20, leave out from beginning to end of line 2 on page 39

Lord Whitty: My Lords, I shall speak also to the other amendments in the group, all of which deal with broadly the same issue: the regime on cartels.

In Clause 41 the Government have made a bold and necessary step, despite criticism from significant sections of business, to make the cartel criteria work. They seek to delete the requirement that for any cartel operation to be an offence under the 2002 Act it has to have been committed dishonestly. That is an unnecessarily high threshold of proof, which has greatly restricted the competition authorities’ ability to use their cartel powers to deal with cartels. The issue should be whether a cartel has been established that restricts competition and is to the detriment of consumers, not whether lies, fraud and deceit can be proved. Scrapping those dishonesty criteria in the first three subsections of Clause 41 is very welcome.

However, there is a “but” coming. The rest of Clause 41 rather spoils and undermines it. Subsections (4) and (5) limit the occasions when an offence can be committed and provide an absolute defence. New Section 188A in subsection (5) states that an offence has not been committed if, despite a cartel-like arrangement, customers are told; or, in the bid-rigging situation, the assessors of the bidders, the clients, have been told; or the arrangements have been published; or that they are made in order to comply with another legal requirement. I fully accept the last defence—it makes sense—but the rest do not make sense. A damaging cartel arrangement can exist whether or not customers are told; a damaging cartel arrangement on contracting bids can be damaging to consumers and can exclude new entrants—small business mainly—whether or not the client has been told; and consumers and small business can suffer detriment whether or not such arrangements are published.

The purport of the notion about publication seems to go back to the old days when registered cartels were recognised and protected. It goes back two or three turns of the competition law provisions and is not sensible in this day and age. It is out of kilter with the rest of the Bill.

Unfortunately, it goes further than that. Even when an offence has been committed, new Section 188B in subsection (6) provides in absolute terms that it is a

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defence if there was no intention to conceal the cartel arrangement; or, extraordinarily, that it was disclosed to legal advisers. Again, cartels can damage consumers and potential small business new entrants whether or not concealment was intentional and whether or not my learned friend has been informed. The effect of the cartel is therefore the issue, not the motivation and not the way in which it has been communicated.

My amendments would delete all reference in subsection (5) to no offence being committed under new Section 188A(1). That is, the only context in which an offence could be deemed absolutely not committed would be where it is to fulfil another legal requirement. The rest of the amendments would delete all references to a defence and replace it with a relevant mitigation. I recognise that there is some mitigation if you have told the customers or the client, but it is not an absolute defence. It needs to be taken into account by the court, but it does not prevent the court reaching a “guilty” verdict. Otherwise, if you do not adopt those two deletions, the positive move by the Government in the first couple of subsections of Clause 41 will be seriously undermined. I therefore hope that the Minister will recognise the sense of that and understand that the very positive consensus on the main issue in relation to this clause will be undermined unless we modify it broadly speaking according to this group of amendments. I beg to move.

Viscount Younger of Leckie: My Lords, there is wide agreement in both Houses that having to prove “dishonesty” makes the criminal cartel offence unnecessarily hard to prosecute, so it is right that Clause 41 removes the dishonesty requirement. However, in the Government’s view one cannot simply remove that requirement and leave the offence otherwise unchanged. Rather, we have had to think through the implications. In place of the dishonesty requirement, the clause provides that the offence is not committed if customers are notified of relevant information or if that information is published in a prescribed manner. These are the provisions which Amendments 56 and 57 would remove.

The reason for allowing this protection is that a limited number of agreements may technically fall within the terms of the cartel offence once the dishonesty requirement has been removed but are lawful under the anti-cartel provisions of the civil anti-trust regime that governs which agreements businesses may enter into. In such cases, it is right that we allow individuals to ensure they do not commit the cartel offence by checking that under the arrangements customers would be informed or the arrangements would be published as prescribed.

This approach builds coherently on existing provisions of the offence in Section 188 of the Enterprise Act. Subsection 6 provides that,

“arrangements are not bid-rigging arrangements if, under them, the person requesting bids would be informed of them at or before the time when a bid is made”.

All the arrangements caught by the offence involve price fixing, market sharing, output restrictions or bid rigging. These are all potentially damaging. Where such arrangements are put in place, the parties should be prepared to justify their actions. In principle, and in

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most cases, it is reasonable that they provide notice of the arrangements to those likely to be affected by them, their customers, either directly or through publication as prescribed; and it would be unreasonable to prevent, as these amendments would, individuals entering into perfectly legitimate activities which they are prepared to publicise in one of the specified ways, just as the present offence provides in the case of bid rigging.

In the majority of cases, of course, the types of agreements caught by the offence will be clearly detrimental to consumers, and the participants will know that they are engaged in unlawful conduct. In those cases, the arrangements will not be published but will be kept secret, and quite rightly the individuals involved will be exposed to prosecution and punishment. Our intention is to remove the prosecutorial difficulties with “dishonesty” while ensuring that only conscious participation in hardcore cartels, which ought to be blameworthy, is caught by the offence.

Notwithstanding those provisions, however, businesses and their legal advisers continued to have some concerns that the amended offence would criminalise the participation of individuals in commercial conduct that would otherwise be lawful. I hope that there is widespread support for the view that it is right to crack down on cartels, but that we ought not to chill businessmen from engaging in legitimate business activities that serve and benefit customers.

Concerns were also expressed about the practicality in certain circumstances of disclosure or publication and the protection of commercially confidential information. In a limited number of cases, for example in relation to arrangements for the joint underwriting of certain insurance contracts, prior disclosure of the arrangements might be difficult. In such cases, customers would be aware that such arrangements were common even without notification or publication and would be untroubled by it. In other cases, the information would already be publicly available in an appropriate forum, such as technical standards. To meet these concerns, the Bill was amended in another place, including by providing individuals with a defence where they did not intend to conceal the nature of the arrangements in certain circumstances or they took reasonable steps to disclose them to professional legal advisers for the purpose of obtaining advice. This builds upon the present approach in the Bill of blessing arrangements that have been publicised or notified.

Amendments 56 to 61 would drastically dilute the protections that these provisions afford by removing the circumstances where the offence is not committed and transforming the defences into relevant mitigations. This would not provide protection to those who were engaged in otherwise lawful behaviour but who, for example, had neglected for whatever reason to give the arrangements the appropriate publicity. It would also discourage parties from entering into agreements that are exempt from the anti-trust prohibitions because they bring gains to consumers where prior disclosure would compromise the benefits the company gains from the agreement. Rather, the individuals would have no defence, but they would be able to plead a relevant mitigation in order to reduce their sentence.

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That is an unattractive prospect that is likely to chill legitimate business activities, contrary to the Opposition’s stated intention.

I thought it might be helpful to address some points that were raised by the noble Lord, Lord Whitty, concerning the Government’s approach. What characterises the kind of hardcore cartel activity that we wish to make it easier to prosecute from legitimate behaviour is that it is clandestine to a high degree. That is where the bar is set. Those responsible meet in secret, use code words and communicate through unofficial channels, thus bypassing a company’s normal procedures. This element is already recognised in the Bill by the provisions that take outside the offence arrangements that are disclosed to customers or publicised. We therefore think it appropriate to give further comfort in relation to the offence by providing individuals with a defence that they did not intend to conceal the nature of the cartel arrangements from customers or prosecutors, or that before making or implementing such arrangements they took reasonable steps to disclose them to professional legal advisers for the purpose of obtaining legal advice. In the light of these explanations, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Whitty: My Lords, I find that reply very difficult to understand. I appreciate that there will be circumstances in which it is sensible for a restrictive practice to be agreed, communicated and, in one sense, registered in order to meet certain other objectives. Those may be legal requirements, quasi-legal requirements, safety requirements or in the broadest sense in terms of people protecting investments and so forth. However, I do not think that it is an absolute defence. It is something that the authorities will need to take into account in terms of motivation and judging whether the companies involved were acting reasonably, but it is not an absolute defence. I find that part of it particularly difficult to understand and particularly undermining of the Government’s general approach on this.

In terms of cartel offences not actually being committed, from the way the Minister has described it, it looks as if, in the bidding arrangements, any restriction would be on the bidders that the client was prepared to consider. It would not depend on their technical ability or their financial viability, but could be purely arbitrary; that is, the old boys’ network. That is effectively what the cartel offence in relation to bidding was attempting to stop. You go to the usual suspects only to bid for a contract and as long as you tell those bidders that you are restricting it to them then there is no problem. It is not even committing an offence. It is not even that there is a justifiable move. It is absolutely the case that an offence is not committed.

9 pm

I can see there are restricted circumstances, for example in the insurance arrangements to which the Minister referred, where such a restriction of the impact would be sensible and necessary. However it is much narrower than the provisions of Clause 5(1) and (2) in terms of an offence not committed, and Clause 5(6) and Clause 6 in relation to the defence. I fear that the

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good intention in the Government’s changes could be undermined by markets or clients having too broad an ability to actually restrict the market. This would be to the detriment of other companies and ultimately the detriment of consumers. I will withdraw in a moment because there is no point in pushing these amendments tonight, but I think the Government need to reflect on these issues.

I am going to slightly abuse the process of the House. I am sorry I have not given the Minister notice although I have given it in various other contexts. I should have raised this on the earlier group of amendments relating to concurrent regulators, specifically in relation to Ofcom. I am not expecting an answer from the Minister on this tonight, but I am giving him notice and ask if he could write to me, or more appropriately to the noble Lord, Lord Stevenson.

I raised this point in the immediate debate after Leveson, in the debate we had the other week and in Committee on this Bill. Would the Government use the opportunity of this Bill—with its section dealing with the competition powers which we are just about to leave—to address the plurality issues that Leveson raises? Leveson made the point that if you want a truly free press you have to have diversity of opinion, and to have that you need plurality of ownership. Clearly there are parts of this Bill which relate to the newspaper industry. I am sorry I did not mention it before the dinner break because it was more appropriate to the discussion of the relations between the CMA and Ofcom, but I will now give notice to the Minister that we may be coming back to this. The last occasion on which the Government had an ability to deal with this was the week before recess when the noble Lord, Lord Stoneham, raised the issue of plurality with his DCMS colleague and was told that the Government are still thinking about it.

The competition section of this Bill is an obvious possibility for raising and implementing the plurality dimensions of Leveson. It has not got anything to do with the other areas which deal with behaviour and royal charters. Nor is it to do with the arguments about freedom of the press and regulations, but plurality is a separate section and—as I say—I have raised it on a number of occasions in various contexts. It would be useful if we could know the Government’s position on that before we reach the end of Report. I am sorry that I have done that out of order. Going back to being in order, subject to the points I have made, I beg leave to withdraw the amendment.

Amendment 56 withdrawn.

Amendments 57 to 61 not moved.

Clause 46 : Power to remove concurrent competition functions of sectoral regulators

Amendments 62 and 63

Moved by Viscount Younger of Leckie

62: Clause 46, page 43, line 13, leave out from “may” to “so” in line 14 and insert “make a sectoral regulator order if the Secretary of State considers that it is appropriate to do so for the purpose of promoting competition, within any market or markets in the United Kingdom, for the benefit of consumers.

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(1A) A sectoral regulator order is an order that amends one or more enactments”

63: Clause 46, page 43, line 22, leave out “An order under subsection (1)” and insert “A sectoral regulator order”

Amendments 62 and 63 agreed.

Amendment 64 not moved.

Amendments 65 to 68

Moved by Viscount Younger of Leckie

65: Clause 46, page 43, line 32, leave out subsection (4)

66: Clause 46, page 44, line 5, leave out “An order under this section” and insert “A sectoral regulator order”

67: Clause 46, page 44, line 7, leave out “an order under this section” and insert “a sectoral regulator order”

68: Clause 46, page 44, line 21, leave out “subsections (1) and (4)” and insert “subsection (1A)”

Amendments 65 to 68 agreed.

Amendment 69 not moved.

Amendment 70

Moved by Viscount Younger of Leckie

70: After Clause 46, insert the following new Clause—

“Orders under section 46: procedural requirements

(1) If the Secretary of State proposes to make a sectoral regulator order, the Secretary of State must carry out the first stage consultation.

(2) The first stage consultation is consultation with—

(a) the regulator whose functions would be removed by the order,

(b) the Competition and Markets Authority,

(c) where the regulator is the Office of Rail Regulation, the Scottish Ministers,

(d) where the regulator is the Northern Ireland Authority for Utility Regulation, the Department of Enterprise, Trade and Investment in Northern Ireland and the Department for Regional Development in Northern Ireland, and

(e) where the regulator is the Water Services Regulation Authority, the Welsh Ministers.

(3) If (following the first stage consultation) the Secretary of State still proposes to make a sectoral regulator order, the Secretary of State must carry out the second stage consultation.

(4) The second stage consultation is consultation with—

(a) the persons consulted at the first stage,

(b) any bodies who appear to the Secretary of State to represent the interests of persons in respect of whom the functions that would be removed by the order are exercisable (“regulated providers”),

(c) any bodies who appear to the Secretary of State to represent the interests of persons who use the services supplied by regulated providers, and

(d) such other persons as the Secretary of State considers appropriate.

(5) The Secretary of State must give the following information to each of the persons consulted as part of the first stage or second stage consultation—

(a) an explanation as to whether the Secretary of State is proposing to remove the functions of the regulator mentioned in subsection (2)(a) of section 46, the functions of the

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regulator mentioned in subsection (2)(b) of that section or both sets of functions;

(b) the reasons why the Secretary of State considers it appropriate to make the order.

(6) The reference to the Competition and Markets Authority in subsection (2) is to be read, in relation to any time before the commencement of section 20(3), as a reference to the Office of Fair Trading.

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(7) In this section, “sectoral regulator order” has the same meaning as in section 46.”

Amendment 70 agreed.

House adjourned at 9.05 pm.