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6 pm

I should like briefly to quote the hon. Member for South Cambridgeshire (Mr. Lansley), who put the position well in Committee when we debated the test of choice. He said that if we had a chance of ensuring a merger control regime that was likely to provide pressures and incentives conducive to competition in general and to a greater intensity of competition in the UK than in other parts of the EU, we should take it. For all the reasons that I have given, we believe that we have the right test, and I urge that those amendments be withdrawn.

I should like now to turn to the amendments dealing with the restoration of the public interest test, which have been the subject of much debate this afternoon. The replacement of the current public interest test in the Fair Trading Act with a competition test is, of course, one of the cornerstones of the proposed new merger regime. Focusing the Bill on competition will provide better merger regulation. It will improve the clarity of the framework for decisions and the predictability of the decisions made under it. The wider the range of factors that can be taken into account, the less certain and the less predictable the outcome.

The change will also bring our statute into line with other major international jurisdictions; the US, the European Commission, France, Germany, Canada and Australia. Switching away from a public interest test to a competition test for assessing mergers has involved hard thinking and tough choices, but it is a focused policy.

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It means that certain factors that could previously have been taken into account—I emphasise the word "could" as opposed to "were" or "would be"—will no longer be capable of being taken into account. We think, as a matter of policy, that that is right. The reform is not just about improving the predictability of decisions or aligning the regime with others. It is necessary because we believe that, in the vast majority of cases, the economy is best served if mergers are assessed solely on the basis of their effect on competition.

Merger regulation is best aimed at safeguarding the competitive intensity in the economy. Competition provides the spur for businesses to be more productive, innovative and efficient, and better able to provide long-term sustainable employment and better products and services for consumers—my hon. Friend the Member for North-East Derbyshire and I share those aspirations.

Adding additional factors to the test for mergers would create barriers to market re-structuring. We think it is wrong to create such barriers unless there are significant anti-competitive effects. Restructuring must be possible if companies and markets are to remain dynamic and competitive.

I recognise, of course, that mergers can have adverse regional and employment impacts in the short term. There are hard cases; my hon. Friends have referred to cases in their constituencies, including the Biwater case. However, I do not think the answer is to step in to block mergers.

The task for the Government—one that we are pursuing—is to make sure that the economy as a whole is strong and to help people to adapt and get new jobs. We must make sure that for every job and every business that disappears, there are new companies springing up and small companies growing. We have a vibrant, dynamic economy. We have the lowest unemployment rate since the 1970s and the lowest inflation and interest rates since the 1960s. We have record numbers of people in work, because private sector employment increased by 1.25 million over the last five years. We are, of course, the No. 1 destination for foreign direct investment into Europe.

I would like to make a further important point to set the merger regime in the context of how the existing Fair Trading Act regime has operated. In practice, competition has been the principal factor in UK merger policy for years. In 1984, the then Secretary of State for Trade and Industry, now Lord Tebbit, announced that references would be made primarily on competition grounds. That doctrine has been pursued by every subsequent Secretary of State.

We must look at why independence from political interference and involvement is important in this regard. I remind my hon. Friends that there is a direct parallel between what we are doing here and what my right hon. Friend the Chancellor of the Exchequer did in the legislation relating to the Bank of England in 1997. Before then, there was clearly political involvement in decisions about interest rates, decisions that were made, at the end of the day, by Ministers. As hon. Members know, such decisions are now taken by the Monetary Policy Committee, and are therefore taken at arm's length from political interference. That has not had an adverse effect; indeed, it has brought remarkable benefits. We took the right decision in that regard, and we are taking the right one here.

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On the question of the Bill's providing for the Secretary of State to make an order defining public interest issues that might be taken into account in considering a merger, when such issues arise it is Ministers themselves who will take decisions about a merger. The Bill will define as public interest considerations only national and public security concerns. However, we have built in appropriate checks on Ministers intervening easily in other areas. We have stipulated that additional criteria will be defined by order, subject to affirmative resolution of both Houses of Parliament. I am aware that some Opposition Members dislike that for one reason, and some Government Members dislike it for another. However, that power provides an important safety valve for the new regime, and ensures that very exceptional cases can be dealt with appropriately. In that sense, we have got the matter entirely right.

As I said, public interest considerations must be specified in the new legislation as relating to national security. Having consulted on whether new powers are necessary, we concluded that they are not. As my hon. Friend the Member for North-East Derbyshire knows, the existing power enables us to add further considerations. The process will be transparent and subject to parliamentary approval, and the Secretary of State must give reasons under the terms of clause 104(7). Safeguarding competition is just one aspect of our duty to protect the public interest. As I said, matters such as employment are dealt with through other targeted measures. My hon. Friend will acknowledge the tremendous progress that the Government have made in terms of economic growth, employment, prosperity and the provision of public services.

In the light of these changes, my hon. Friend also expressed his concern about the important issue of accountability. We have built in additional accountability elements, a long list of which I could run through. Although accountability will not be achieved through ministerial decision making, there will be additional transparency and checks and balances. For example, the OFT and the commission will have to publish their reasons for taking key decisions such as reference decisions, and for not referring.

The commission's chairman has also made a commitment to publishing during an inquiry provisional conclusions on the competition aspects of a merger or market. Decisions will not come, therefore, like a bolt from the blue. There will be open discussion of provisional findings, and of the remedies for dealing with them. The tests themselves will be focused. They will be conducted within a tighter procedural framework, and a number of institutional checks and balances will be established. For example, the OFT board will replace the Director General of Fair Trading as the pinnacle of the OFT's operation. Taken together, the measures show that we have got things right. I appreciate my hon. Friend's concerns, but I believe that adopting these measures will bring real benefits.

On failing firms, if an authority believes that a firm will in any case exit the market because it is failing, that judgment will influence the assessment of whether the merger may be expected to result in substantial lessening of competition. Another relevant consideration is whether the failing firm's market share is likely to fall to the acquiring firm in any event. It is not a question of weighing the position of a failing firm against the

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problems created by a substantial lessening of competition. If Opposition Members are suggesting that saving a failing firm should take priority over guarding against anti-competitive markets, I must disagree. It would not be appropriate to allow mergers to proceed that would result in a substantial lessening of competition, simply because one of the firms involved was failing.

I hope, therefore, that hon. Members will not wish to press amendment No. 69 to a vote and I urge the House to resist it. I commend, however, the technical Government amendments that are part of this group.

Mr. Waterson: When I moved amendment No. 18—it seems like half a lifetime ago—I had no idea of the great fissures that were about to open up in the modern and the not-so-modern Labour party. I hope that we will hear no more from Ministers about having plenty of time to debate the Bill, because the harsh reality that is staring us in the face—especially if we now have a Division—is that we will not even begin to debate the issues of cartels and market investigations. On any view, that is wrong. I do not wish to waste quarter of an hour by pressing our amendments to a vote. We are not happy with much of what the Minister had to say, but we have rehearsed the arguments before and I am happy to say that I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 202, in page 11, line 11, after "competition", insert—

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