Enterprise Bill

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Dr. Cable: May I clarify one point that is not clear from the debate so far? Does the Minister agree that the role of the board is to provide a strategic overview, which will then guide the director general, or will individual board members vote on specific executive decisions on mergers? Can she better define the nature of the job so that we can better judge what sort of representative would be most appropriate?

Miss Johnson: We certainly envisage the board looking at strategic functions—a key element of the way in which the board should operate. I can confirm that the advisory panel arrangements are a precursor and that members remain no more than advisory at present. They will contribute to the OFT role through the new arrangements. Some members may join the new board, but the panel will conclude its arrangements when the board comes into being.

Mr. Waterson: I want to be clear about this matter. The Minister described the advisory panel, perhaps not wholly accurately, as a precursor. The quotation that I read out seemed to suggest that the director general was making a clear distinction between the role of the advisory panel and the likely future role of the board. Perhaps I was reading too much into it, but that suggests to me that a different sort of person from those currently on the advisory panel would be considered to sit on the board. Will the Minister please clarify the matter?

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Miss Johnson: It depends in what sense I mean the word ''precursor''. We can disagree about what that word means, but the panel is an advisory panel that acts in an advisory capacity on policy matters. It might help if I run through the sort of decisions that we envisage the board will take. We are talking not about day-to-day decisions but about high-level decisions, market studies and cases of strategic significance; about approving the annual plan, the annual report, financial statements, the budget, negotiating strategy, matters such as the service delivery agreement and major or unusual capital projects; about considering the OFT's communications strategy and approving the OFT pay and human resources issues, all at a high strategic level. The board will not be involved in operational, day-to-day matters.

Mr. Waterson: I am grateful to the Minister for that explanation. As she guessed, this is a probing amendment. I am still not wholly clear about whether the advisory panel will continue in parallel with the board or be subsumed in it.

Miss Johnson: Neither will occur. The panel will cease to exist on the institution of the board arrangements, or possibly prior to that. The advisory panel will not continue when the board is established.

Mr. Waterson: I am grateful to the Minister for that clarification and for the clear indication that business will have a voice on the board. As I said in response to the hon. Member for North-East Derbyshire, I do not want a quota system. I merely wanted to flag up the fact that business wants to be represented and to know that people on the board have a good business track record and have had to wrestle with some of the issues from the other side of the equation. If the OFT is to work, it must carry out its complex new tasks and duties effectively and successfully. It must be sensitive to the needs of business and earn its respect and support, or it will not be as successful as it should be.

Whether or not the provision is part of a gaffer's charter in the eyes of the hon. Member for North-East Derbyshire—he is irredeemably and lovably old Labour on these occasions—we shall keep returning to the major theme that we are eager that the Bill should not heap extra burdens on business, even if that is unintentional.

I am happy that business is to be represented. I read in my newspaper today that Mr. Bernie Ecclestone is considering making further contributions to the Labour party. Given the roaring success of his last contribution, which got him everything he wanted and the contribution returned, I do not entirely blame him. He might be the sort of business man with a major track record who could be considered for a shortlist.

I beg to ask to leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the First schedule to the Bill.

Mr. Djanogly: I want to speak in this debate as there are questions relating to specific provisions to which I want the Minister to reply.

First, the Bill refers to there being

    ''no fewer than four . . . members''

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of the board. Where did that number come from? Why not have a higher number—10, for example? That may seem a strange request, but as members of the board are to be political appointments, the fewer the members, the greater the possibility of political influence. That is why I was surprised by the low number. The chairman is to be consulted only on appointments, which means that, depending on the nature of the chairman chosen, there is room for political input. We should completely remove the Government from the appointment process.

In his starred amendment, to which we shall come, the hon. Member for Twickenham proposes prior scrutiny by the Trade and Industry Committee. I disagree with that approach. Why should anyone get involved in the first place? There should instead be a right of recall. In other words, if the Government or the Trade and Industry Committee disagreed with a proposal from the board, they could call it in. With that exception, why not let the OFT rule itself, free from maximum political interference? I suggest a system like that of corporate governance, with an executive and a non-executive board, where the non-executives have the right to nominate suggestions but not to make appointments, which would be considered and voted on by the whole board, subject perhaps to veto by the Government or Select Committee.

There is talk of a maximum five-year term but no minimum term. I understand the practicalities of that, although I would be interested to know the minimum period that the Government are considering. Again, there is concern that many short-term appointments would increase the Government's leverage on members' replacement, re-adoption and terms of employment. Although I would not speak against a term of five years, I would want to be reassured that short-term appointments to the board would not habitually be made.

The committees in the schedule also need to be considered. For example, can they be given the authority to make decisions or only recommendations to the main board? Would decision making by the board require consultation with the Secretary of State? Paragraph 11 would, effectively, enable the OFT to allow a committee to do anything that the main board can do, so clarification is required on how much power the committees will have. How important does an issue have to be before it needs to be considered by the whole board rather than a committee of the board? If committees can make decisions rather than recommendations to the main board, how will the main board supervise the operations of the committee? That is particularly important because the schedule provides for non-members of the main board to be appointed to committees, which leads to questions such as how appointments to committees are to be made. The issue of committees having the same power as the main board is surely just as important as how appointments to the main board are made—yet the schedule does not address it. I would be grateful for the Minister's consideration of those points.

Miss Johnson: Perhaps it would be helpful, in answer to some of the points made by the hon.

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Member for Huntingdon, if I set out how we see the schedule. I will also pick up some of the other points that were made.

The schedule sets out fundamental terms by which the OFT must operate in order to ensure the accountability and transparency of this public body. The schedule stipulates that the OFT shall consist of a chairman and, as the hon. Gentleman said, a board of at least four other members. As I said earlier, our thinking is in the order of five to seven members. My right hon. Friend the Secretary of State will appoint the chairman and, in consultation with the chairman, the board members. That process will be conducted according to the principles of open competition and the Nolan procedures.

John Vickers, the current Director General of Fair Trading, will be the first OFT chairman for the remainder of his term, in line with what was agreed when he was appointed. The terms of appointment will be for a maximum of five years, as the hon. Gentleman said, and are renewable. I do not think that we should stipulate a minimum term in legislation. That would provide too little flexibility, and judging by the hon. Gentleman's remarks, I think that he understands the need for flexibility. Indeed, it is sometimes attractive—especially initially, when one is making a number of appointments—not to appoint everyone for the same time frame, simply to ensure that not all future appointments are made at the same time and that there is continuity in the organisation. It would be unfortunate if we stated a minimum time in legislation.

12.15 pm

Mr. Field: We have talked about a minimum term, and paragraph 3(1) of the schedule sets out the maximum term of five years. Has the Minister thought about reappointment for second or subsequent terms?

Miss Johnson: The terms of appointment are certainly renewable. We have not put a limit on appointment, although various guidelines about the operation of Nolan appointments may put a ceiling on it. At the moment, however, nothing in the Bill does that, and we envisage that the terms of appointment will be renewable.

It is fair to say that the presumption will be for people to serve a full term. With initial appointments, however, there may be different reasons for considering the terms of appointment. For example, if a brilliant candidate were prepared to accept only a term of three years, which might well be the case, we might want to have flexibility built in. That would ensure that we could harness the skills of someone who was entirely appropriate and had much to offer the organisation and operations of the OFT, but who would not necessarily want to commit to a full five-year term and would be uncomfortable if that were the only possibility.

 
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