Enterprise Bill

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Mr. Waterson: The hon. Gentleman will be able to confirm that the Government offered that bed of nails to several people with substantial corporate backgrounds before the final appointment was made.

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Dr. Cable: Indeed. It was a somewhat embarrassing episode. They may have ended up with someone who satisfies no one, certainly not the small investors. That example demonstrates the difficulty of appointments to quangos. One can satisfy the Nolan conditions—they may be people of total probity—but it is hard to get people who are technically competent, with experience of the real world, yet also politically sensitive enough, although not in a party way, to understand the impact of their decisions on real people. That is why we need to have measures in parallel with the Bill that build in political accountability.

I should like to take the Under-Secretary back to the question that I asked on Second Reading. She did not answer it then but she was pressed to answer many questions in her summing up. Do the Government have it in mind to introduce in parallel with this legislation, measures to strengthen political accountability, comparable to those that applied in the Bank of England Act 1998. I sat on the Standing Committee that considered that measure when I first came into the House. The Act reflected great credit on the Government, particularly on the Chancellor. It is one of their big success stories. It said nothing about political independence or accountability. During its passage, the Chancellor made a statement in the House to the effect that he would try to ensure, by writing to the chairman of the Treasury Select Committee, that appointments to the Bank of England Monetary Policy Committee would be interviewed after he had nominated them and that they would regularly appear before the Select Committee to give an account of their work. He subsequently wrote a letter to Lord Radice explaining what he wanted to secure. There was all-party agreement that it was a good way to proceed and that system was highly successful. Will the Under-Secretary confirm whether she and the Secretary of State envisage something comparable, which I would find enormously reassuring? It is not a party point; as I said earlier, it is one of the Government's success stories from the previous Parliament, on which they should try to build.

Reflecting on that successful experience, it is clear that having members of the Monetary Policy Committee—in this case, members of the OFT—subject to confirmatory hearings in the House has many advantages. Responding to Members rather than just Ministers entrenches their sense of independence. Sir Edward George is perceived very differently from Mr. Bridgeman, who was fired in dubious circumstances by the Secretary of State's predecessor. The fact that Sir Edward is accountable to the House has strengthened his position, conferred credibility and made his independence much more real.

The fact that members of the Monetary Policy Committee—and, I hope, of the OFT—are subject to that scrutiny toughens them up. Hon. Members gave some members of the MPC a real going over. I recall Sushil Wadhwani being roundly criticised for plagiarising his statement to the Select Committee. Probably in response, he subsequently proved himself to be an exceptionally independent and hardworking member of the MPC who has cut swathes through the

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policy debate. Having people on the OFT publicly exposed, identified and criticised in that way would add greatly to its status. I hope that the Government does not view the OFT as a quango that can be packed with people whom Ministers regard as safe and comfortable rather than with people of real standing who can stand up in public and be accountable to this House. The latter approach would do wonders for the Government's credibility.

Dr. John Pugh (Southport): My hon. Friend tabled an amendment that was not selected. Does he agree that, as the OFT will take difficult and controversial decisions in future, the Under-Secretary should explain why she is not interested in having the protection that prior scrutiny will give to her or any future Minister's name?

Dr. Cable: Yes, my hon. Friend makes a helpful point in highlighting one of two ways of resolving the problem. The first—the amendment that I tabled on the subject was late, so I am not criticising the selection process—could be brought up again later. It is to entrench in the Bill a provision that mandates the prior scrutiny of OFT members. The Treasury Select Committee argues that its own powers should be entrenched in legislation. The other way would be for the Under-Secretary to state, today or later, that the Government want to learn from good experiences with the Bank of England legislation and try to introduce something comparable to that model—on a voluntary basis as negotiated with the Chairman of the Select Committee. I view that as a less satisfactory solution, but it would still be a big step forward. I hope that the hon. Lady will provide us with some hope that the Government are thinking along those lines.

Mr. Harry Barnes (North-East Derbyshire): My main and major contact with the Director General of Fair Trading in the current OFT came about because of a merger that led to a loss of 700 jobs in my constituency. I was trying to encourage the director general and the Secretary of State to refer the matter to the Competition Commission. It was a major issue, so I had relatively easy access to the Secretary of State, the Government Office for the East Midlands, the Office of Fair Trading and its director. It was difficult because the merger took place during the summer recess, but eventually it could be pursued through the avenues of the House.

My interest is in a Back Bencher's avenues of access to the board proposed in the Bill. The issues of accountability raised by the hon. Member for Twickenham are also relevant and important.

Clause 2 transfers the functions of the director general to the new OFT. Clauses 5 onwards deal with ''General functions of OFT''. Several points are presented, but they do not connect with the mergers rule because we have not yet reached the mergers section of the Bill. Presumably, those matters are also transferred in accordance with clause 2. I am trying to find my way around this highly complex Bill. Later on, it becomes clear that one section can be understood only with reference to another, which then refers us to yet another. It would be helpful to have some clarity from the start.

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Mr. Djanogly: I welcome the board and the new balance of power that it represents for decision taking. Hopefully, a wider range of expertise will be brought into play. It is certainly an improvement on the position whereby power rests in the hands of one individual, the director general.

Legitimate questions arise. The hon. Member for Twickenham anticipated my approach, although I look at it from a slightly different angle. It boils down to questions of accountability. I shall not deal with the specifics of schedule 1 until later, but I want to speak about the nature of the board. The Bill does not mention—I will be corrected if I am wrong—the concept of a board. I do not know why and look forward to hearing the Under-Secretary's explanation. It might be because the provisions refer to the investigations that the full board or committees of the board can undertake, so the term ''OFT'' is used. On the other hand, it could be due to the Government's approach to corporate governance and accountability.

The Bill presents standard quango-type arrangements rather than a board with more corporate-governance-type arrangements. I wonder whether we might be missing an opportunity to merge the best in the fast-moving field of corporate governance and best practice with modern governmental practice. The Government have clearly opted for the old quango approach, as will become clear in various ways as we proceed through the Bill. I shall go through the specifics later, but we are missing an opportunity. I shall argue for greater transparency through better and more effective corporate governance. The bottom line is that the OFT is not a company, but a statutory corporation, so it will be a non-ministerial department staffed by civil servants.

To that extent, there will, I believe, be a requirement for parliamentary political accountability. That point was picked up by the CBI, which has called for parliamentary approval by the Trade and Industry Committee of appointments to the board. I know that this issue relates to starred amendments and will not be debated specifically, but I should be interested to hear where the Government stand on that power being attributed to that Select Committee. I believe that other Committees are discussing this sort of issue.

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There could be an opportunity for a company-type corporate governance system, with the Trade and Industry Committee or, indeed, the Government being able to call in specific issues. That would turn the way in which the system works on its head. The current position is that the Government will make the appointments, and the Chairman, I think, can have a say in some cases, or there is a need to refer to him. However, the OFT could be allowed to run itself, with others—whether they be the Trade and Industry Committee or the Government—having the right to call in decisions or decisions on appointments. Those are a few thoughts on the wider issues, and I should be interested to hear the Government's opinion.

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Dr. Pugh: Four ministerial appointments are certainly better than one, but the whole character of the Bill will necessarily lead to more decisions and more activity by the OFT, and more controversy, on which will hinge appreciable amounts of finance.

It has been suggested that prior scrutiny by the Trade and Industry Committee would be a good thing, and everyone can see that that would have merits. If such scrutiny were included in the legislation, what would be the downside? As far as I can see, there would only be an upside. When controversial decisions that gave rise to public disquiet or allegations of financial impropriety were made, any future Minister could always answer that the appointment was made not by them, but by a House of Commons Select Committee, or at any rate was confirmed by the Committee. That would be a defence for any Minister at any time in future. I simply repeat my question; what would be the downside?

 
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Prepared 16 April 2002