I believe that removing the existing obstacle that stands in the way of tenants in the rented sector being able to enjoy the benefits associated with running a home business is difficult to argue against. I see no reason why people who rent should be prevented from having benefits, such as lower overheads, or from being able to balance their work and family responsibilities more flexibly.

I hope noble Lords can see that these amendments are a sensible updating of the law to reflect how we increasingly use our homes. The related government amendments to Clauses 152, 153 and 157 are purely technical and ensure that amendments to Clause 35 and after also apply to Wales. On that basis, I hope noble Lords will support these amendments. I look forward to hearing the noble Baroness speak to the amendments tabled in her name.

Amendment 34 agreed.

Amendments 34A and 34B not moved.

Clause 35, as amended, agreed.

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(4) Subsections (2) and (3) do not limit the circumstances in which a dwelling-house which is let under a home business tenancy is to be regarded as “let as a separate dwellling”.

(5) In this section—

“enactment” includes provision made—

(a) under an Act, or

(b) by or under a Measure or Act of the National Assembly for Wales,

“England and Wales enactment” means any enactment so far as it forms part of the law of England and Wales,

“home business tenancy” has the same meaning as in section 43ZA of the Landlord and Tenant Act 1954.”

Amendment 35 agreed.

Lord Cromwell (CB): My Lords, I apologise most sincerely that events conspired so that I was unable to attend earlier discussions of the Bill, but I hope that the Committee will nevertheless allow me to speak to the amendment standing in my name. I raised the matter with the Minister in a meeting with Cross-Bench Peers before Christmas.

I should declare an interest as a trustee of a trust which in a small way lets out residential property. In another part of my life I am involved in working with entrepreneurs, some of whom invest in and let out property. I have also run a small business and an international chamber of commerce for several years. Enough about me.

As others have said, there is much to be welcomed in the Bill. One aspect of that is the removal of the risk to a landlord letting out residential property that a business run from such a property will give rise to a business tenancy under the 1954 Act. I certainly assure the Committee that this is a very real problem for landlords letting out property. In that, I have absolutely no doubt. I share the concerns expressed by the noble Baroness, Lady Hayter, about the definitional aspects but I am sure that many of us have had the experience of trying to write page after page of legal definition and ending up by replacing it with the word “reasonable”. I suspect that tenancy documentation will evolve to cope with this issue.

However, there is a second leg to this issue: the fear which landlords have that allowing a residential home to be used for a business will end up getting them entangled in the rating system, particularly if that business does well, grows and prospers, which presumably we would all welcome. That concern among landlords relates not just to the period when a tenant is in occupation but when they leave; the landlord fears finding themselves with a property that is unlet but subject to business rates. The effect of that is simply to make landlords reluctant to let out property with home businesses, to put clauses in agreements which prevent it and to avoid colluding with tenants who nevertheless try to start up such a business.

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I am sure that many of your Lordships will be aware that small businesses can apply for relief from rates. However, almost everyone seems to be in agreement that the rating system is not simple; indeed, it is complex. Perhaps as an indicator of this, I notice that there are a number of businesses which, as a chargeable service, offer to assist small businesses in navigating through the rating system. I would hate to put them out of business but, as an indicator of the complexity that small businesses face, the market speaks for itself.

Moreover, I believe that among landlords there is a perception that it is dangerous to allow someone to run a business, no matter what reliefs there may be available, within their residential premises. The noble Lord, Lord Deben, touched earlier on the point that perception of regulation is every bit as important as its actuality. This amendment seeks to achieve simplicity and clarity by making it clear in straightforward terms that allowing a home business to operate will not bring the property within the rating system. It is my proposal that combining clarification on the tenancy issue and the rating issue would be the two sides of the bridge that get us across this river of landlords’ resistance to letting out residential properties to people who wish to run businesses within them. I beg to move.

Lord Stoneham of Droxford (LD): My Lords, I was tempted to intervene in the last debate that we had on the amendment of the noble Baroness, Lady Hayter, because this is quite an interesting issue. I am not going to be able to support fully the noble Lord, Lord Cromwell, but I am pleased to come in on this debate. I have often voted for him in parliamentary by-elections because his was a name that I knew. I also thought that the genes were probably more in favour of change and reform than conservation.

Lord Cromwell: I have to disillusion the noble Lord but I am very grateful for his support. I must disabuse him of that—I have no genetic link to others of that famous name. My family is older but my instinct to chop off the heads of the overmighty may have been inherited by mistake.

Lord Stoneham of Droxford: I do not take away from my comments because that is exactly how I was behaving in those elections.

The amendment cannot be supported as it stands, although it has good liberal tendencies. It is a very difficult area, as the noble Baroness, Lady Hayter, said. It is difficult to get a balance here between defining by restriction what we can do and opening it up; the general tenor of the Bill is to try to open up the issue to encourage home businesses. The one thing that this amendment does not make absolutely clear is that the tenant or owner must occupy this property, so any tenant or somebody who owns it would have that overriding right, and the planning law does not accept that. Therefore in that sense the amendment cannot be accepted. This is the issue—whether we define the planning restrictions on home businesses in the legislation; the Minister has already told us about the danger.

With great respect to the noble Baroness, Lady Hayter, as regards some of the definitions she has used, she accused the definition of “home business” of

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being vague, but the fact that you have to take account of the location of a property does not tell you whether you can allow a home business. That will be a matter of judgment, therefore quite vague, whereas the intention of the legislation is to open this up and to encourage home businesses, obviously within the planning restraints that are currently there: you have to occupy the property, you cannot fundamentally change the home for the business, you cannot have people coming to buy from the premises, and you cannot employ people. We know that there is already great flexibility in where we are and that people do those things, but obviously, if they overstep the mark, there is the danger that if their neighbours think that their community life in their residential area is disturbed, they will object and have the grounds for doing so. Therefore this is an area of great interest. I would be in favour of where we are in the Bill, where we do not define it in the legislation, although we may come back to it through regulations. Clearly we cannot accept the amendment because it does not make it absolutely clear, which it has to, that the premises have to be occupied by the owner or the tenant.

The Earl of Lytton (CB): My Lords, the noble Lord, Lord Cromwell, raises an interesting point. Before I go any further, I declare an interest as a practising chartered surveyor. Rating is one of the things I get involved with; I am a landlord of holiday and private rented accommodation as well as business accommodation, so I get a bit of everything here.

The chief difficulty is one of fact and degree about when things move from being “residential property” as a term of art to something quantifiably different. The problem is that they are different tests for different purposes. For instance, there may be a test under regulations that come out as a result of the Bill. A different test may be applied by the Valuation Office Agency to determine what is and what is not a business. When I think in terms of holiday lettings, for instance, I am aware that if a residential property is available to let as a holiday unit for more than 120 days in the year, I think, it is deemed to be a business use. I am not suggesting that there is an issue between holiday letting and home businesses in this instance, but that exemplifies the point about the fact and degree transition.

The empty rates issue would be a live one were it to kick in, because the amount levied under empty rates is typically considerably more than the amount that would be levied under a council tax assessment. I have raised this matter before in the House, and used as an example a property of my own, a 1,000 square foot property let as offices to a business tenant under a conventional contracted-out commercial lease. The rating assessment, off the top of my head, was £12,000 rateable value, and something over £5,500 was payable annually by that small business in business rates.

Fifty yards up the road I occupy a large residential property in band H, but I pay nowhere near £5,500 or so in council tax. My bins are emptied for me within that charge, which, of course, is not the case for the business rate payer. The issue comes about because of the way in which business rates are levied. As I have said before, business rates are disproportionate when compared with residential rates given the services provided

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and the nature of the accommodation in question. Assessments made on property value, services or any other measure you might choose do not support that differential. There is potential to change this situation through a change of definition and results from a non-domestic assessment, bearing in mind the tests that may be used by the Valuation Office Agency, which is charged with optimising the revenue obtained from those rates. This issue needs to be clarified.

6.45 pm

I do not for one moment ask the Minister to answer all those points but this issue needs to be clarified because all these various organs, whether they be concerned with planning or valuing non-domestic properties for rating purposes, need to be streamlined and they all need to sing from the same hymn sheet. This simply will not happen if people have doubts about this issue and are fearful about what is happening elsewhere in unstated regulatory practice.

Lord Deben: My Lords, we should be very grateful to the noble Lord, Lord Cromwell, for raising this question. It is only part of the question, if I may put it that way, because there is a real issue which the previous speaker was absolutely right to raise. We have to think this through and I am not sure that it has been thought through. What is the nature of a property which was rented originally, or, indeed, owned originally, as a house, and then a business is started within it under the terms of the Bill? I put it like that because it was pretty clear in the past what you had to do: you were running a business, so you had to report it to somebody and somebody told you whether you could or could not run a business in those circumstances. That is, bluntly, more or less what happened.

We also know that a very large number of people run businesses, do not report them to anybody and nobody cares too much. As long as they do not make too much noise or other nuisance, everybody is perfectly happy. However, that is an unacceptable position because some people manage to run a business in those circumstances but others do not and that is not right. We want to encourage people to start a business in these circumstances because it is the natural way to do so. We do not want interfering local authority personnel to arrive and say, “You can’t do that in your garage. You have got to move to our extremely nice and very expensive industrial estate”.

Two tax elements are involved here. I do not think that the noble Lord, Lord Cromwell, mentioned the other one. I am very interested to know what happens about VAT. If a house is said to be a business premises as a result of this measure, there is also the question of whether, if you sell it on, you retain your right to sell on your principal residence, because it could be your principal residence as well as your business. How would that interact with selling a business premises where you have received rent? Then there is another question about how you have structured the business and which part of it is used as a business. The Committee can see immediately that there is a series of complications here. I dare to say to my noble friend that I am not quite sure that people have actually thought this through.

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I want to do precisely what the Bill is intended to do, which is to say that you cannot prevent people running a business from their own homes. That is not an acceptable way for either a landlord or local authorities to operate. I know some areas where local authorities have operated absolutely appallingly in what they insisted on. They made it very difficult for people. This is not just in small circumstances. There was a really bad example in my constituency when I was a Member of Parliament in which a local authority said that it was unacceptable for a marquee to be put up in a very large house with a very large amount of ground around it because it was being used as an exemplar of marquees. They could have a marquee if they wanted one for a party—as long as they did not have too many parties—but to have a marquee as an exemplar of marquees, because the business was for marquee renting, was unacceptable without planning permission, which the local authority would not give.

People get themselves into terrible situations. We need to be quite sure where we are going with this particular change. However, I think that the amendment in the name of the noble Lord, Lord Cromwell, is not acceptable for all the reasons that have been given: it is not complete enough and it opens the gates to misuse of the Bill, which none of us wants. We have to ensure that the person lives in the house; that is obvious. This is one of those really difficult situations because it is like the question of the elephant: you can describe what you mean by this, but to write it down in a satisfactory way is quite difficult. Clearly, if a house is largely used for a business and a flat is effectively attached to it then that is different from the house being used as a house in which some of the rooms are used for the business. Some of the rooms may sometimes be used by the business. All those things make it extremely difficult.

I do not want my noble friend to think that the only answer to this is not to do it; that would be a great disappointment and I am sure that she will not think that. We want to do it, but I am not sure that this little bit has been as thought through as it will have to be. The noble Lord, Lord Cromwell, has rightly brought it to our attention and I hope that my noble friend will accept that we need to know more about this before we can be entirely happy with it.

Baroness Neville-Rolfe: My Lords, I welcome the noble Lord, Lord Cromwell, to the Committee and thank him for joining our discussion, and for putting us right on the history of the Cromwell family. More seriously, he has brought his practical experience of enterprise and of the subject. I thank him for his support for the Bill, and I think he supports Clause 35 as well. This has been a good debate. It is excellent when Back-Benchers raise these sorts of concerns with amendments of this kind.

For completeness, I should add the wider action that we have taken on business rates. In the 2014 Autumn Statement, the Chancellor announced further help for business rates, bringing the total support for 2015-16 to £1.4 billion. That included some very significant measures targeted specifically at smaller businesses, such as the doubling of small business rate relief for a further year and the £1,500 discount for smaller shops,

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pubs and restaurants. We have also, of course, given councils powers to grant discounts entirely as they see fit. When they do so, we automatically meet 50% of the costs. Those powers can be used to support small businesses to encourage growth.

It was also good to have the support of my noble friend Lord Stoneham. As usual, he made perceptive points about the drafting and rightly drew attention to the requirement for owner-occupation.

It is always good to have the noble Earl, Lord Lytton, joining the debate, in view of his knowledge of the subject. I note what he says about empty property rates and the services provided to business rate payers. Of course, the current system on empty property rates was introduced by the last Labour Government. We recognise that the empty property rate can be burdensome, especially at times of economic difficulty, but the need to balance changes to the system owing to fiscal consolidation has meant that we have left things as they are.

I turn to the amendment and the issue at hand. The purpose of the proposal is to exclude home-based businesses from paying business rates altogether. I agree that this is an important issue, and we have to provide sensible and clear rules on home working so that they support growth and businesses know where they stand. However, we believe that the amendment is unnecessary, as we hope that we have indeed already achieved the desired outcome through some sensible and clear rules. We have ensured that, in the majority of circumstances, home-based businesses will not attract business rates—the noble Baroness will be glad to hear that. We provided that clarity through guidance published by the Valuation Office Agency last summer. The guidance clearly sets out the circumstances in which the Government do not expect businesses to pay business rates. That guidance is available on the GOV.UK website.

As a result, in the majority of circumstances home-based businesses will not attract business rates, but there are some exceptions in the interests of fairness. For example, a dentist’s surgery on the ground floor of a domestic house continues to attract business rates. Indeed, that example serves to illustrate why we favoured guidance over legislating on this matter in this Bill. Guidance allows sensible decisions to be made reflecting the circumstances on the ground in each case. Attempting to legislate to cover all situations could, I fear, increase uncertainty over home working and allow some substantial businesses to avoid business rates. I hope that noble Lords agree that is not what we wish to achieve, and that clear guidance is the best approach in this situation.

My noble friend Lord Deben raised questions about tax, so I shall comment on VAT in particular. A home-based business, as I am sure he will know, should remain liable for VAT in the same way as other businesses, subject to the same thresholds.

Lord Deben: I was referring not to that issue, but to the issue of clearing up the connection between business rates and home businesses. Unless we do that, there could be circumstances in which the home became liable to business rates and then it could be seen as a

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business property. I want to make sure that, if such a business was sold, the owner could maintain the right to sell his own property without VAT—

Lord Cope of Berkeley: And capital gains tax.

Lord Deben: Yes, the capital gains tax element becomes very serious in that regard. I know that my noble friend will tell me that, happily, it is all here, but I am just not sure that everybody will understand that. I want to make sure that the guidance makes it clear that people are protected.

Baroness Neville-Rolfe: I understand what my noble friend says. He is talking about untoward effects, which we are not in the business of creating if we can possibly avoid it. The sensible thing would be for me to take away that point on VAT and capital gains tax. I am always rather careful about saying things about capital gains tax, as it is a complex subject. So we will write on that issue and copy the letter to anyone else who is interested in that point.

I finish on another positive point by reminding noble Lords that, in his Autumn Statement, the Chancellor announced that the Government would conduct a review of the future structure of business rates. The review will report before the Budget in 2016, and the Government will publish its terms of reference. I would encourage interested parties, including noble Lords with expertise in this area, to engage with this review, because it is an important opportunity.

I hope that the noble Lord has found my explanation somewhat reassuring and, on this basis, will withdraw his amendment.

7 pm

Lord Cromwell: I am very grateful to the noble Baroness for her comments and to the range of speakers for the breadth of topics that we appear to have covered somewhat inadvertently this evening.

On occupancy, changing one word in the amendment, from “used” to “occupied”, would deal with that, but I think that the issue runs wider than that. Equally, if the property became classified as business premises, as the noble Lord, Lord Deben, is concerned, if it were excluded from rates, that would merely strengthen the case for it not to be so classified. However, I do not dismiss the suggestion that this is a complex area. Opening up any new area of opportunity will always keep tax lawyers busy trying to find ways to work that to their clients’ advantage.

On the question of perception, I am grateful for the reference to the government website. I have a couple of extracts here, and I notice the language:

“You don’t usually have to pay business rates for home-based businesses … You may need to pay business rates as well as Council Tax”.

One category is entitled, “You’re a small business but don’t qualify for relief”. Flippancy aside, I register that it is a question of perception. For landlords trying to work through that, it is much easier just to say no.

In the hope that that will get further consideration, I am happy to withdraw my amendment.

Amendment 35A withdrawn.

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Clause 36: CMA to publish recommendations on proposals for Westminster legislation

Baroness Hayter of Kentish Town: My Lords, the amendment is in my name and that of my noble friend Lord Stevenson. I shall speak also to Amendment 35C in this group. Clause 36 empowers the Competition and Markets Authority to make and publish recommendations about the impact of any proposed legislation on competition. That is clearly to be welcomed. The CMA, after all, exists to promote competition in the interests of consumers and therefore, should laws be proposed that could be detrimental to consumers, we should know about it in advance.

Indeed, the Government recognise that regulation, procurement and other activities can affect markets and therefore envisage the CMA playing a key role in challenging the Government where they are creating barriers to competition. However, there is one problem with the clause. That arises from our failure, when the CMA was created, to persuade the Government to establish a CMA consumer panel analogous to those for the Legal Services Board, Ofcom and the Financial Conduct Authority, or some such similar mechanism, to ensure that real insight from consumer advocates and from the consumer perspective was built into the CMA’s judgment on such matters.

It is a matter of regret that we failed in that, given that the CMA’s primary duty under Section 25(3) of the Enterprise and Regulatory Reform Act 2013, which set it up, is to,

“seek to promote competition … for the benefit of consumers”.

It therefore seems essential that the voice of consumers be embedded in the CMA’s view as to whether draft legislation will be to the benefit or detriment of consumers with regard to competition.

Hence, Amendment 35B requires the CMA to undertake its consideration of draft legislation in consultation with consumer advocacy groups. Amendment 35C takes the Government’s new clause one stage further by requiring the CMA to undertake a similar exercise not simply when legislation is proposed but to carry out an annual health check on the state of competition and consumer protection in key markets, including by listening to consumers, consumer advocates and small businesses.

Without consumers at the heart of the Government’s drive to increase competition and tackle the cost of living crisis, any plans or measures are likely to be ineffective. Big business and special interests can always get the ear of Ministers, civil servants and regulators, and big businesses can and do—as we heard earlier from the noble Lord, Lord Deben—take advantage of market weaknesses.

We see this in the failure to pass on reductions in fuel prices and in the banks’ failure to work in clients’ interests. We see it in the bus market, where bus fares

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have risen by 25%—five times faster than wages. Big bus companies have cut crucial routes that people rely on to maximise their own profits. Indeed, the failure in competition within the bus market costs the taxpayer £305 million a year. We see it in myriad other markets where the consumer is unable to shop around—the monopolies and oligopolies, referred to by the noble Lord, Lord Deben, in the earlier group. Indeed, if ever there was a failing market, it is where energy companies have not passed on reductions in wholesale costs to consumers. We have to have a mechanism for action to force such companies to cut their prices when wholesale costs fall, or where phone calls simply cannot get through to the right person, again as described earlier by the noble Lord, Lord Deben. We have to have a mechanism for an annual review of vital markets to identify those where consumers are being taken for a ride.

For years consumers and their representatives knew that energy price cuts were not being passed on to users, but there seemed to be no mechanism for making the Government take action. Labour wants consumer groups, such as Which? and Citizens Advice, to work with the CMA and sector regulators to draw up an annual competition audit or health check of Britain’s economy, which will lead to a programme of action for regulators and the Government. We need this analysis to identify broken markets, so that Ministers and departments can respond accordingly.

Amendment 35C would ensure that the consumers are at the table when priorities for action are decided. Consumers and their advocates should not have to shout from outside. They should be given a direct say in how to tackle abuses or concentrations of power which undermine competition. Without this amendment, decisions as to whether markets are working in the interests of the public will be taken solely by regulators. These sadly have failed to protect small businesses in the banking sector when the mis-selling of interest rate swaps undermined some 40,000 small businesses. They failed retail clients when banks were selling PPI and endowment mortgages. Regulators have failed to ensure that users got a fair deal from the big six energy firms.

In all of those cases, consumers and their representatives were well aware of the serious problems with markets not working competitively, but they were denied a proper hearing. So our approach is to embed the consumer interest into decision-making, so that decisions about priorities for improving competition are taken in the public interest, in the interest of consumers and in the interests of small businesses, and with policymakers having to confront problems rather than leaving them to drag on. The proposed annual competition health check, led jointly by consumers and the competition authorities, would ensure that regulators and politicians act where markets are not working in the public interest. Crucially, it will include consumer organisations and small business representatives, rather than just being done by the CMA. I beg to move.

Lord Deben: I did not intend to speak on this but the noble Baroness has referred to me so often. I had better explain to her that I think that this is nonsense. It is nonsense from beginning to end because it

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misunderstands how business works and what the Government should do. The last thing we want is the establishment of a collection of people who professionalise the representation of consumers. Any of us who have ever had to deal with the double standards which some of them put forward about their own businesses and the way that they are never quite sure whether they are representing the consumer or some business operation which they have, which is part of the way in which they support themselves, recognise that this is not sensible. What is sensible is to have a proper organisation whose job is to ensure proper competition.

The Government ought to be concerned about having proper competition. I would be strongly opposed to the idea that the only people concerned with proper competition are the consumers. Government and the competition authorities should both be committed to ensuring competition. Decent companies, of course, can be very much in favour of competition until they see that there is an advantage if they are monopolistic. I do not blame them for that: it seems to me perfectly simple that everybody would like to have a nice, comfortable life in which they do not have to compete with anyone else. You therefore need a balance in society where you constantly refresh the market; you constantly make the market work. However, the idea that you do that by way of consumer representatives misses the point; we have to make government do it. That is what the Government are there for; it is not what Which? is there for. Which? is there precisely to be outside the system and to shout. Government is supposed to run the system so that there is proper competition. I do not want government to be excused from that.

Therefore, I do not agree with these amendments. I hope that the Minister will recommit the Government to ensuring proper competition. They should ensure, too, that the Competition Commission has the powers, the resources and the intent to achieve the best level of competition possible. We should also begin to have a bit more of the philosophical background to this, which is essential if we are to win the battle. If we cannot have competition as we ought to have it, frankly, the argument for the free society is difficult to maintain. If that is important, let us make it the purpose of government and the Competition Commission, and not say that it has to be run on a sort of old-fashioned, tripartite basis, which is to allow the Government to get off the hook. They should be on that hook firmly for promoting competition.

Lord Whitty (Lab): My Lords, I apologise to the Committee for having joined your Lordships so late that you seemed to have made good progress without my help and I shall try to focus on this amendment. I do so partly because I was going mildly to support my noble friend but also because the noble Lord, Lord Deben, has provoked me to say how much I disagree with what he has just said, including going into the wider philosophical and ideological areas right at the end, because a free society requires representation of people’s views as well as mechanisms, legislation and regulations and so on.

At various stages, the Government have recognised that consumer organisations of one sort or another

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are important in ensuring that competition is delivered. I am very happy to see that this clause gives the CMA the ability to comment on draft legislation, which is absolutely right, but, in doing so, it has to pay attention to its prime objective, which is not to create competition full stop but to create competition in the interests of consumers. Since in various contexts successive Governments have recognised that there needs to be some focus on that consumer input, it is important that we have some requirement on the CMA at least to consult such organisations when it is making an assessment of future legislation.

For example, many of us, including the noble Lord, Lord Deben, sat through lengthy proceedings on the previous Energy Bill, which sets up a whole new system of energy regulation and government interventions, with state and consumer subsidy of various bits of the energy system. It does not look entirely like a free market; I think that the noble Lord, Lord Lawson, at one point referred to it as Gosplan. It is not quite that, but it is a whole range of things to ensure delivery and availability of energy ultimately in the interests of the consumer, but it will change the nature of our whole energy system.

7.15 pm

After that, the Government and Ofgem decided to refer the structure of the energy market to the CMA. Logically, it should be the other way around. Many years ago we should have had—of course the sector regulator rather resisted it—a CMA inquiry into the energy supply system, and we should have based the legislation on that. But we are where we are. However, it is very important that a big piece of legislation such as the Energy Bill is subject to the test of whether it will affect the way in which energy is supplied to consumers, including business consumers.

Looking to the future, we have a quasi-statutory requirement: Citizens Advice acts as the representative of energy consumers. The powers—I declare my past interest as the chair of Consumer Focus—have passed to it, specifically in relation to the energy sector, which is an oligopolistic sector where it is very difficult to ensure that competition operates.

That is not the only example. My noble friend has referred to the financial sector. Seven years after the financial collapse and the “too big to fail” discussions, one organisation still supplies virtually a third of the total mortgage market. We do not have effective competition within the retail financial services sector. In the transport sector, there is a franchising system for the railways which has been shown to be less than totally adequate in recent years. There is a statutory body, Passenger Focus. If there were legislation to change the way in which the franchising system operates, we would expect the Government to take into account the views of that organisation. If the CMA is, rightly, to be given a pole position in commenting on future legislation, and if there was railways legislation in that context, then we would expect it to consult Passenger Focus.

We have just passed a Water Act which has marginally extended competition in the business supply sector. In that area the Consumer Council for Water, another

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statutory body supported by the Government, had some doubts as to whether it would operate effectively. That would need to be reflected. The water industry is, par excellence, a so-called natural monopoly on which we are trying to impose some unnatural competition. I am in favour of that, but the way it operates and affects individual consumers and small businesses needs to be brought into the equation.

The CMA’s role is to look at new legislative proposals—sectoral or general—and ask whether they enhance competition for the benefit of consumers. These organisations, which in many ways the Government support and in other ways finance, or require industry to finance, are the repositories of a fair amount of wisdom—not total wisdom by any means—and expertise. It is important, therefore, that, if we, rightly, impose on the CMA a requirement to comment on proposed legislation, it does so after consulting and taking into account the views of such organisations.

With regard to my noble friend’s second amendment, it would be healthy to have from the CMA an overall assessment of the level of competition in our economy, taking into account in its report the views of consumer groups. It may be slightly too frequent to address the total economy once a year, nevertheless the CMA should be required to do that, and there is a role for the consumer organisations in that too. However, my noble friend’s first amendment is essential if we are to give the CMA this responsibility, which I believe we should.

Lord Deben: There is a fundamental difference between saying that the CMA should consult with a range of bodies, which is what the noble Lord says, and the way in which the noble Baroness presented it, which suggested that it was a kind of duo or tripartite, or some sort of system where they do all this together as part of the same thing. There is a difference between saying that the CMA has a responsibility, which it carries out by, of course, taking into account the views of all these people, and saying, on the other hand, that it is a kind of function where they are part of the actual operation. Doing that second—and that is the point I was trying to make—removes the fundamental responsibility of both Government and the CMA to do this job properly.

Lord Whitty: My Lords, we have limited time as we are in Committee so I will only take a moment. It is certainly true that, at the end of the day, this report will be the CMA’s report and all it says is “in consultation” with these bodies. My noble friend and I both argued that the internal proceedings of the CMA should reflect a different structure of relationship with consumer bodies. That is now past. However, we are now saying—as I understand my noble friend’s amendment—that the CMA has a responsibility for producing this report, but it should do so clearly and explicitly and in the Bill, in consultation with the bodies that represent consumers and which the Government have recognised as so doing.

Baroness Wheatcroft: My Lords, I apologise for not being here at the beginning of proceedings, but I have to intervene on this. Consumer groups are extremely

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effective in making their views known. They lobby us very effectively and they certainly lobby the CMA. While it is right that the CMA should listen to them, I do not think that there needs to be any formalisation of that relationship when it is looking at legislation. On the second issue, the idea of an annual report on the state of competition in the economy, I agree with the noble Lord, Lord Whitty, that this would be a massive undertaking for the CMA to have to complete every year. In fact, it is very hard to see how it would be able to undertake its main role if it had to produce that report on an annual basis. It also seems to me that because consumer groups now have the right to bring a super-complaint, there is a degree of duplication anyhow in the amendment. If consumer groups feel very strongly, they can make their super-complaint. Therefore, I take issue with the amendment.

Baroness Neville-Rolfe: My Lords, Clause 36 is important and I thank the noble Baroness for providing us with an opportunity to debate it. In our various dealings on other legislation, we have agreed on the importance of competition to consumers and the role that consumers play in making competition a reality. The Government are very keen on competition and I am not going to try at this late hour to engage in the philosophical debate between my noble friend Lord Deben and the noble Lord, Lord Whitty, both of whom have great experience of regulation, regulators and competition. Indeed, I learned from the noble Lord, Lord Whitty, during the passage of the Water Bill, when I was on the Back Benches. I am clear, however, that the Government want to ensure that the powers are in place to effect proper competition. I hope this clause will be a significant contribution to that, empowering the CMA formally for the first time to make recommendations on legislation.

Amendment 35B relates to consulting consumer groups. The CMA is the independent, expert competition body. It is the body best placed to assess the likely impacts on competition of legislative proposals. In considering proposals from Government, it will take into account their impact on consumers. This is a key value and it is enshrined in the CMA’s primary duty as set out in the Enterprise and Regulatory Reform Act 2013. This states that,

“the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers”.

Consumer advocacy groups have a valuable and vital role to play in scrutinising proposals brought to Parliament. That will continue and they can make their views on proposals known as and when they see fit. As the noble Baroness, Lady Wheatcroft, rightly said, they often do that in many different ways. The CMA works closely with consumer advocacy groups, including Which? and the Citizens Advice service. CAB is also an active member of the Consumer Protection Partnership, although, sadly, Which? chose not to join it. The CPP brings together publicly funded enforcement, advocacy and advice organisations to share, compare and interpret intelligence to identify trends in the causes of consumer detriment. Regular scheduled meetings of this group and its sub-group are held throughout the year, and it plays an important role.

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The CMA’s main responsibility is to ensure that competition and markets work well for consumers. That is one of the main reasons we value competition: it leads to better deals for consumers by encouraging innovation, new products, new ways of doing things and more competitive prices. In its annual plan for 2014 the CMA made a commitment to put consumers at the heart of everything it does. It is embedding this approach in its thinking and processes across the organisation, as well as establishing a programme to reach out to consumers and to a wide range of consumer organisations. An example of the success of that approach is the low income consumers project, where the CMA engaged actively with the CPP and other organisations that have a role in protecting consumers to review how problem debt affects consumers’ decisions and choices regarding the goods and services they purchase. There is also a practical timing point in response to this amendment. Requiring the CMA to consult others before making use of its new power would inevitably delay the timeliness of its recommendations, which might in turn diminish its influence and impact on new legislation.

Amendment 35C relates to an annual competition health check in collaboration with consumer advocacy groups and representatives of small business. Well functioning markets work for consumers, business and the economy, and for small business. The aim of the CMA is to make markets function in that way and to promote competition. In understanding markets and establishing priorities, it is of course important that the CMA takes into account the views of interested parties, including consumer advocacy groups and small business. However, effective mechanisms are already in place to achieve that. The intelligence gathered by the CMA through its engagement helps to inform its annual business plan. On 26 November it published its draft annual plan for consultation, and its strategic assessment was published the following day. The draft version of that plan sets out plans and priorities for the coming year. The consultation gave interested parties, including small business, the opportunity to provide views and comments on the proposed priorities. The consultation period closes on 23 January and a final version of the plan will be published in March.

The CMA has limited resources, and it is important that it is focused in the most effective way. New and effective mechanisms are already in place to enable it to gather intelligence, including vital consumer intelligence. The introduction of a new duty to produce an annual competition health check would divert resources away from tackling problems in markets that have already been identified, which at present, of course, include banking and energy. In view of the comments that the noble Baroness made, I am sure that she welcomes that. The CMA inquiry is a very important moment for the energy market. The independent and authoritative analysis that the CMA will bring will start rebuilding trust. The investigation is looking at many very important issues: barriers to entry, the impact of vertical integration, market power in generation, and weak incentives for companies to compete in retail markets, including of course any lack of consumer engagement.

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To conclude, therefore, we are doing enough, and the provisions in the Bill should be welcome, although I suspect that we may not agree this evening. I am very grateful for the support of my noble friends Lord Deben and Lady Wheatcroft, and other noble Lords, on this important amendment. In the circumstances, I hope that the noble Baroness will agree to withdraw her amendment.

7.30 pm

Baroness Hayter of Kentish Town: I thank the Minister but her suspicions, as ever, are completely accurate. We do not agree.

We are getting close to the time to finish, but I have two things to say. The problem with the CMA or for any of us who are legislators, in government, or whatever, is that the impact of malfunctioning markets falls most heavily on consumers. They are the ones who get ripped off when markets do not work. Not to have embedded in discussions in both identifying those problems and in looking at solutions the very people who feel the whack of it seems to be a mistake in legitimacy terms.

Baroness Neville-Rolfe: I agree that consumers are absolutely central to this. I have said it on many occasions, but I believe that we have a reinvigorated CMA. The processes for engagement with everybody, including small businesses and consumer groups, which are the subject of the second amendment, are very strong. It would be a mistake, as others have said, to put yet more requirements and red tape into this area because I fear that that would have an adverse effect on the ability of the CMA to tackle and use its competition powers to look at these very important markets in the way in which it is looking at energy.

Baroness Hayter of Kentish Town: The Minister might well say that. However, the Which? manifesto—I gather there is a general election in the offing—is that the CMA and all sector regulators should carry out routine, cross-examining analysis on the state of consumer competition. That may sound familiar to those who have been reading the amendment. The Minister may be very confident that consumer representatives feel that everything is tickety-boo—sorry, Hansard—but that is not how the consumer organisations themselves see it, and they have called for this. That is an important element. They still feel that they are shouting from the outside.

I take very much the comments made by the noble Baroness, Lady Wheatcroft, on what the problem is, as someone who has both run a lobbying organisation and an embedded consumer body within a regulator. The difference in the impact that one could make is enormous. Shouting from the outside one tends to do late. Indeed, I think the Minister gave it away when she said that consultation could delay something. The suggestion I hear from that is that we will have our report and then we will consult on it. That is not what we are trying to do.

Baroness Neville-Rolfe: There are systems within the CMA set-up, including the CPP, which allows it to consult on things. Who knows what the exact facts are,

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but that is how the system is designed. It is to try and give pre-eminence to competition which is done in a way that is envied by other member states I visit. They are very concerned both about competition and consumers.

Baroness Hayter of Kentish Town: The Minister thinks that we are not very far away. She is saying “Do it in consultation” and I am saying that, too. I tabled an amendment about consultation and the noble Baroness is saying that we are doing it in consultation but does not want this amendment because she does not want to do it in consultation. That is not quite an accurate portrayal of what we are saying but it sounds as if we are closer than maybe the Minister wants to admit. Having a review of how something will affect the competition and asking the CMA that is meant to do this only for consumers and not do it in consultation would be strange. Therefore, adding the words,

“in consultation with consumer advocacy groups”,

seems easy. That was the first amendment.

On the second amendment, the idea is to make sure that all the time somebody is asking, “Are there failures

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in the market?”. The difference between us is that it sounds as if everything is going well, yet our experience is that consumers are not always getting a good deal from parts of the market. The system that is set up is not good enough. We have been in government. My noble friend was actually in No. 10 but he obviously was not doing enough at the time. My other noble friend was a Minister, so it clearly goes back a long way. The idea is that we should have a driving mechanism, which is what the second amendment is about. The first amendment is important and one to which we should return. The idea of excluding those who are most affected by the lack of competition cannot be right, but for the moment I beg leave to withdraw the amendment.

Amendment 35B withdrawn.

Amendment 35C not moved.

Clause 36 agreed.

Clause 37 agreed.

Committee adjourned at 7.35 pm.