Enterprise Bill

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Dr. John Pugh (Southport): I am all in favour of people thinking about the issue a lot more carefully and I listened carefully to what the hon. Member for Eastbourne said. He gave me the sense that we are debating a limited kind of application; that it could apply to public bodies only in so far as they operate in the commercial environment.

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The hon. Gentleman then went on to describe situations where traditional local authority services have rivals in the private sector, so it seems to me that the amendment could embrace almost any public body activity where there is, in theory, the opportunity of a private enterprise providing a similar or analogous service. If that were the case, would it apply right across the board to the whole range of public sector bodies and their operations?

The hon. Member for Huntingdon talked about the public sector acting on a private sector basis. I am not aware, however, that it is always entirely clear when a local authority is or is not doing that. I think it would be accepted, therefore, that an anxiety would be that we might apply it to areas of public sector operation where there are no customers—there are citizens—and where there are no actual profits. However—

5.30 pm

The Chairman: Order. This is a rather long intervention.

Dr. Pugh: I accept that.

Mr. Djanogly: This is a fascinating and complicated area, and the hon. Gentleman makes points that should be considered in that context.

I end by saying that if the Government—

Mr. Waterson: Following on from the previous intervention, this is an interesting train of thought. Would my hon. Friend care to comment on a situation where a hospital, for example, decides to subsidise its mainstream activities by taking in laundry from people other than its patients and to turn that into a business to create income? What would be the position if it entered into arrangements that were anti-competitive with private laundries in a particular locality? Which side of the line would that take us?

Mr. Djanogly: My hon. Friend makes a good point. I remember that in Westminster we contracted out collections from parking meters and serviced collections from other councils' parking meters. We did that as an ancillary service to the existing service, which as the law currently works in local government, was all that we could do. If, however, the Government changed it—I think that there are proposals to do so—so that councils can provide services, clearly problems may occur with competition in terms of public money being used, in effect, to corner the market. Those are relevant considerations here.

If the amendments are not passed, I should be interested to hear the Under-Secretary's response to whether, if a public hospital had some private beds, as many do, it would be caught within the regime? If the public hospital increased its private beds to 50 per cent., would it then be caught within the regime? What I am interested to hear, as things stand, is whether the extent to which a public body involves itself in private activities has any bearing on whether it is caught within the definition of business.

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Huw Irranca-Davies (Ogmore): The way in which the clause is worded would seem to include most trading enterprises whether they are in the public sector, the charitable sector or the private sector. The amendment, which includes the words ''a local authority'', would seem to encompass the whole remit of what a local authority does.

Ultra vires and charitable status have already been referred to, but let me give an example other than hospitals. If a college was, in effect, trading as a charity, neither in the public nor the private sector, but having, as part of its enterprises, summer schemes that it operated out of its sports facilities under a separate trading arm, a separate trading enterprise, my interpretation of the wording of the clause is that those would be included. The same is true if a local authority has a dual-use sports centre. The operation is similar. It provides activities for schoolchildren during the day, but becomes a commercial operation in the evening. The amendment would extend the clause to cover the complete reach of the local authority beyond its simple trading. Will the Under-Secretary clarify that point?

Mr. McWalter: My hon. Friend the Member for Ogmore (Huw Irranca-Davies) anticipated one of my points. However, it is important to recognise that some of the analogies that have been used are inappropriate. It is not clear whether there is a market in health care in all circumstances. The NHS is predicated on the idea that someone is entitled to health care if they need it, and the cost of meeting that care will be provided, regardless of whether they have any market power or the capacity to purchase. That raises different issues from the question of whether a market obtains.

On local authority services, the object of the best value regime is partly to try to ensure that a local authority will not undertake to deliver services if another party, such as another local authority or a private company, could deliver them more effectively, thus literally giving best value. In the special circumstances of the public sector, the market is unquestionably imperfect. So far as health care is concerned, it is good that it is imperfect, as it means that people who do not have market power nevertheless receive the service. There is therefore a surrogate—best value—system in the public sector that has the effect of subjecting public bodies to market forces so far as it is appropriate. This might be another case in which we look to legislation outwith the Bill to deal with some of the concerns expressed by hon. Members. I agree with many hon. Members that it is important that such market disciplines are used to ensure that consumers are not ripped off by the public sector any more than they should be by the private sector.

Miss Johnson: The amendments seek to expand the definitions of consumer and business for the purposes of market investigations. We are in danger of losing sight of that. Amendment No. 328 deals with the definition of business, which in clause 173

    ''includes a professional practice and...any other undertaking which is carried on for gain or reward or which is an undertaking in the course of which goods or services are supplied otherwise than free of charge''.

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It is important to understand that that means that the goods or services that are publicly provided commercially will be covered.

Mr. Waterson: The Minister rather skated over the word ''or'', which is crucial as it appears that there are two alternative tests. One is that an undertaking is being carried out for gain or reward—in other words, commercially—the other is a much lesser test:

    ''or which is an undertaking in the course of which goods or services are supplied otherwise than free of charge''.

That eliminates the NHS at a stroke, unless the Government have further plans to which we are not yet privy. It certainly does not cover undertakings that are being carried out commercially.

Miss Johnson: I will elucidate the definition of business, which is the same in the Bill as it is in the Fair Trading Act. Hon. Members will all be interested in the NHS in this context. In a recent merger case, the Heart hospital in London was sold by its private owners, Gleneagles Hospital UK, to the national health service. That shows that the definition of business catches NHS trusts when operating on a commercial basis. The OFT investigated the merger and did not refer it to the Competition Commission because no competition problems arose. It fell within the appropriate definitions. Amendment No. 328 is therefore unnecessary.

The hon. Member for Twickenham spoke to amendment No. 136. The definition of consumer mirrors that of existing Fair Trading Act provisions in part 3. It is included for the purpose of the definition of customer, which is also used in part 4. ''Customer'' includes a customer who is not a consumer. Consumer is defined by the clause as any person who is either

    ''a person to whom goods are or are sought to be supplied (whether by way of sale or otherwise) in the course of a business carried on by the person supplying or seeking to supply them; or . . . a person for whom services are or are sought to be supplied in the course of a business carried on by the person supplying or seeking to supply them; and who does not receive or seek to receive the good or services in the course of a business carried on by him''.

That definition already covers consumers of goods and services whether publicly or privately provided as long as they are goods and services supplied in the course of a business.

The amendment faces two problems. First, it would go further in encompassing consumers of public goods and services irrespective of whether they are provided on a commercial basis. As it stands, the definition covers goods or services that are publicly provided on a commercial basis, as I explained. I would not want to widen the definition to include those publicly provided with goods or services for free or on a non-commercial basis. Secondly, the amendment would extend the definition of consumer to any person who is privately supplied with goods or services, which we believe is an inappropriate extension of the definition.

In the light of my full explanation of both amendments and their relationship to the existing clause, I hope that I can persuade both Opposition Members to withdraw their amendments.

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Mr. Waterson: I am not wholly convinced that the Minister changed course in response to my helpful intervention. We can accept that anyone carrying out an undertaking in the course of a business should be caught by the definition, but I part company with the Minister when she talks about a commercial basis. An enterprise may not be carried out on a commercial basis, in the ordinary sense of the term, and may make a nominal charge or one below what would normally be charged, but the only way to fall outside the definition is to charge nothing at all—or no money, which would remove the NHS as we bequeathed it to the Government.

We get into murkier waters where public bodies set up an operation that is usually carried out by commercial bodies, but do not charge a proper or full rate. As long as they charge something, however nominal, we believe that they should be covered by the definition. On one reading they already are, but the Minister's attempt to explain it by stressing ''on a commercial basis'' undermines her own case.

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