Enterprise Bill

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Clause 1

The Office of Fair Trading

Question proposed, That the clause stand part of the Bill.

Miss Johnson: The clause will create a new body corporate to be known as the Office of Fair Trading, or the OFT. The organisation currently known as the OFT is not a statutory body, but simply the administrative support that has grown around the Director General of Fair Trading—the DGFT—to support him in the exercise of his statutory functions. The office of DGFT is abolished in clause 2.

The OFT name has traditionally been used when publicising and explaining the work of the DGFT. However, references in the Bill to the OFT are purely to the new corporate authority proposed in the clause. The new OFT will consist of a board, headed by a chairman. The board will include non-executive members and people with a range of skills, expertise and abilities relevant to competition or consumer protection. It will widen the expertise involved in decision making and will strengthen the link between competition and consumer protection. It will also depersonalise regulation in this important area.

The DGFT currently has a wide range of functions in the areas of competition and consumer protection, many of which are being reformed in the Bill. The Government believe that in the light of the reforms, it is no longer appropriate for all those powers to be vested in one individual. John Vickers, the current DGFT, supports the proposals. He has worked closely with me on taking this forward and I value his support.

The new OFT will be independent, encompass a broad mix of interests and skills in the decision-making process, will be fully accountable through working arrangements that are open and clear, and will be able to act swiftly and effectively.

Mr. Waterson: Like my hon. Friend the Member for Huntingdon, I, too, declare an interest, although I am not convinced that it needs to be declared. I refer the Committee to my entry in the Register of Members' Interests. I am a solicitor practising in commercial law in the City, now and again.

The debate on clause 1, although it is relatively uncontroversial, will be useful because it sets the tone for the consumer protection aspects of the Bill and it is worth a nod at its historical context. As the Under-Secretary said, the Office of Fair Trading already has a virtual existence, although it is not formally established, and we welcome the fact that it is to be set up. The hon. Lady stated that it is the trend, rather than having one individual, that there should be a corporate approach to regulation. She said, too, that a range of skills was needed and we will have a short debate on the board later. It is important that there should be a wide range of skills, if possible.

Understandably, most Governments never seem to make consumer protection legislation a high political priority. Like Halley's comet, it comes around about once every 30 years. I can testify to that, as at the time of the fair trading legislation in the early 1970s I was a

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research assistant to Sally Oppenheim-Barnes, who was the hon. Member for Gloucester and is now in another place. We did a great deal of work on consumer protection issues. The first section of the Fair Trading Act 1973 relates to setting up the office of the Director General of Fair Trading.

In 1972, a Conservative political centre published a pamphlet called ''Square Deal for Consumers'', which makes interesting reading. The noble Lady Oppenheim-Barnes was a contributor and a luminary, as was the late Nicholas Ridley. The pamphlet also mentions an obscure young researcher called Nigel Waterson, who turned into an obscure middle-aged Front-Bench spokesman. Such is life. Thirty years have passed, and here we are, revisiting the same issues. The pamphlet is actually rather interesting and I am prepared to lend it, as I have a whole box of them at home in the attic. It is amazing what one writes when one is young.

The pamphlet echoes some of the issues that are covered in the Bill: consumer advice and its availability to ordinary consumers; local authority responsibilities and their organisation; proposals for a national structure for consumer protection and for legislation in the aftermath of the 1971 Crowther report on consumer credit; the Sale of Goods Act 1979 and exclusion clauses, which were also matters for legislation; unit pricing; metrication, which was a novel concept at the time; shop hours; servicing of products; product safety; and—surprise, surprise—package tours, although timeshare probably takes their place as the more modern equivalent of an ever popular rip-off on consumers. The date-stamping of food is also featured. Nowadays, one can barely see what food one is buying because of the date stamps and ''best before'' dates. At the time, however, the proposal was new. The pamphlet also refers grandly to,

    ''The implications of common market entry.''

That golden age of consumerism followed on from the successes of people such as Ralph Nader in the United States. I am sure that the Under-Secretary will give due credit to the fact that the Government were Conservative and that they faced many other more major issues in their relatively short life. They took it upon themselves to propose and take through the fair trading legislation. As I said, the first section dealt with the Director General of Fair Trading, as does the first clause of the Bill.

On Second Reading of the legislation on 13 December 1972, the then Sir Geoffrey Howe said:

    ''The Bill has two principal purposes—first, the promotion of increased economic efficiency and, secondly, the protection of the consumer against unfair trading practices.''

He went on to make a point that has been a philosophical strand in the approach of successive Governments ever since:

    ''these two purposes are complementary to each other.

    They are both founded on the Government's firm belief that competition provides a means of diffusing power and responsibility throughout the community and of continually widening the area of freedom and opportunity. Competition provides spurs to efficiency and incentives to seek out and supply the varied wants of the consumer''.

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He also talked about the role played by

    ''the army of traders, entrepreneurs and retailers . . . By serving themselves, all these people serve the wider community as well'',

We should remember that during the passage of this Bill.

It is also interesting to note that Sir Geoffrey said

    ''competition is not an automatic panacea''.—[Official Report, 13 December 1972; Vol. 337, c. 453–454.]

That was during the era of Selsdon man, an early version of what became Thatcherism, but even then there was no concept of unbridled competition red in tooth and claw. There was then a firm commitment by the Conservative Government, as there is by the current Conservative Opposition, to introduce regulation where appropriate, encourage competition and remove bars to proper consumer protection. Sir Geoffrey went on to talk about the sovereignty of the consumer, which he said should not be taken for granted, and about the need for consumers to be adequately informed and protected against unfair or misleading marketing techniques.

Sir Geoffrey said that fair trading is good business and I would echo that now. He noted that the first institutional innovation proposed in the legislation was the appointment of a Director General of Fair Trading and went on to draw parallels with other countries. In part, the proposals were based on the federal cartel office in West Germany. At the time, most people would have agreed that the model chosen was probably the most appropriate. Broadly speaking, the office of Director General of Fair Trading has served us well during the years. There is no political argument about that in Committee, but we, the Government and consumer organisations share the view that that legislation needs revisiting. We must take the opportunity and I am pleased that we are doing so now.

The new Office of Fair Trading should be properly established in a corporate sense, with properly set out responsibilities and duties. It should be accountable and its board should cover a wide range of skills, interests and backgrounds.

There are three broad themes to which we shall keep returning. The first is effectiveness: to what extent the Government proposals are not mere rhetoric but will make a real difference to people's lives. Secondly, we will consider closely whether there are unjustifiable burdens on business. Thirdly, we will ask whether resources are available to back up some of the new powers. That applies as much to the Office of Fair Trading—as it will continue to be called—as to the trading standards departments of individual local councils.

We welcome the clause. It is eminently sensibly and seems to be supported by all sections of opinion in the consumer world.

Dr. Cable: As the hon. Member for Eastbourne suggested, this is an appropriate time to raise some broad themes about the Bill and I will pick up a couple of phrases that the Under-Secretary used in emphasising what she saw as important: the depersonalisation of decisions and the independence

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of the OFT. That independence in day-to-day decisions is probably the most important change that the Bill will bring about. I will comment on that, particularly on how independence can and should be entrenched through political accountability. We could have that debate now or on schedule 1 stand part, but this time seems as appropriate as any.

As I said on Second Reading, the Government are right to move in the direction of independence. Otherwise, there would always be a conflict between a Minister's party role and role as a member of the Government, in which he or she must consider the broader interest. There have been several cases in which such a conflict has occurred. None the less, we should not be too modest or humble when debating whether politically sensitive decisions should always be handed over to quangos that are politically independent. There are dangers in that route too. We must strike exactly the right balance.

The system that has operated until now has a lot to commend it. No one would ever suggest that there is anything remotely corrupt in the British system under this Government, or their predecessor. It is a very honest system. Ministers have no personal interests in the decisions that they make. Equally, Government intervention in merger decisions in recent years has been minimal. Ministers have used their powers sparingly, such as the Under-Secretary's predecessor but two in the case of the takeover of regional electricity companies. Important political issues needed to be addressed and Ministers were right to use their political role in that capacity.

11.15 pm

We need something in the Bill that retains political accountability, even though it makes the OFT independent of political direction on a day-to-day basis. We must be careful not to throw out the baby of accountability with the bathwater of unnecessary interference. Achieving that balance will be difficult. We could produce a situation that is worse than the present one if the OFT simply becomes a politically unaccountable quango in which people are appointed by Ministers and feel that they have little accountability to Parliament.

Those of us who have been in Whitehall know how the system operates. The permanent secretary has a draw, which may not be specifically labelled, containing a list of the great and good. When a big public appointment needs to be made, it is got out and dusted. The familiar suspects appear and the usual compliments, such as ''safe pair of hands'', ''doesn't ruffle feathers'', ''is well liked in the City'' are available. Assuming those qualifications are met, the suitable appointment is made. There was a wonderful example yesterday, with the appointment to look at corporate governance, which was a typical quango appointment.

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