Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witness (Questions 448 - 459)



  Chairman: Professor Cave, thank you very much for coming to see us. We shall start off with a question from Baroness Cohen.

Baroness Cohen of Pimlico

  448. I am asking the kind of core question. Are you satisfied that the draft Bill, and clause 112 in particular, provides the clear defining line that you were looking for between OFCOM's functions in spectrum management and the strategic, political role of the Secretary of State?
  (Professor Cave) I am familiar with clause 112, yes. My concern in relation to clause 112, I think, begins with subsection (4) which gives the Secretary of State very substantial powers to make directions in relation to such matters as the way in which spectrum trading might be organised and the way in which auctions of spectrum might take place. My preference would be for a division of labour which put that particular aspect of the regulatory activity on the OFCOM side of the fence rather than the Secretary of State's side of the fence. I say that because I think it is essentially a sort of subordinate technical function rather than a strategic issue; and secondly, I think that in the long term the Secretary of State might be glad not to be intimately involved in what might be very difficult technical decisions for which he or she will be subject to a great deal of lobbying.

  449. As a supplementary on that, when I was a civil servant, some 20 years ago, it was rare for Secretaries of State to go round giving directions either general or specific; it was always taken as a reserve power, but not much used. What was envisaged here at the policy end, can one of the Bill team tell me?
  (Mr Green) There is a fairly strict test or hurdle for the Secretary of State to overcome before giving a direction. It is clearly not something that is done lightly or every day of the week. For example, it is necessary for the Secretary of State to go to Parliament and effectively get the direction confirmed, otherwise it ceases to have effect. So what the Bill tries to balance is the degree of intervention on the one hand by ministers on matters which are of wider public interest, with ensuring a degree of transparency and parliamentary accountability.

  450. Professor Cave, can I take you back? Does that solve some of your problems with clause 112(4)? It seems to me that the Secretary of State really is not going to do anything, is he?
  (Professor Cave) On that footing, the thought comes to my mind that if the Secretary of State did not use the power then perhaps it might be better, in the interests of certainty, for the power not to be available to the Secretary of State.

  451. Is this a fair view of the matter, Mr Green? I cannot quite see what it is doing either, you see.
  (Mr Green) Maybe it would help to take a hypothetical example. At the top level of the powers of direction there are matters of national security and public safety and so on which are pretty standard, they are in the earlier clauses of the Bill. When one comes onto spectrum, I guess the question is the extent to which ministers need to be involved in the wider public interest, bearing in mind that, for example, the remit of OFCOM on spectrum management will go much wider than just telecommunications and broadcasting spheres, so across the broad spectrum. The decisions that OFCOM will take will be, for example, on spectrum would one say that ministers should not be involved in the decision when, say, the analogue television broadcasting is switched off, what is going to happen to that spectrum, should it be devoted to mobile services, should a certain amount be set aside for broadcasting? Then there is a legitimate question, it seems to me, which is, are we saying, or should the Committee consider, that that is something that ministers should not be involved in at all, it should be left totally to the independent regulator? The other point of view is that this is a matter of major national strategic importance bearing various implications for public policy, and it is right that ministers should be allowed to become involved, subject, of course, to the parliamentary accountability that I referred to earlier.

Lord Pilkington of Oxenford

  452. What would they do? In terms of parliamentary accountability they would have to come before the House with a regulation, would they?
  (Mr Green) The direction would have to be confirmed, I think it is, within 40 days, otherwise it will cease to have effect.

  Baroness Cohen of Pimlico: Negative resolution?

Lord Pilkington of Oxenford

  453. What would it be? Could you explain this?
  (Mr Susman) This is a relatively rare form under which the order contained in the direction is made first, then laid before Parliament, but it will lapse unless both Houses approve it within 40 parliamentary days.

Baroness Cohen of Pimlico

  454. Professor Cave, did you have a point to make?
  (Professor Cave) Yes, can I make an observation. My remarks related to subsection (4) of that clause, not to section 3 which, as I understand it, permits the Secretary of State to give directions over the allocation of the assignment of spectrum in certain circumstances. I would certainly regard it as being appropriate for the Secretary of State, for example, to decide whether spectrum should be allocated to public service broadcasting or to a commercial use. I would regard that as being a decision which related to a key policy output, and that, in my view, is the appropriate sphere for Secretary of State decisions, whereas the ways and means of conducting auctions—first-price auctions, second-price auctions, things of that kind—seem to me to be something better done by the appropriate agency.

Lord McNally

  455. Following on from that, if your general aim is to get the public sector to pay a market price for its spectrum, do you think the Bill has the balance of powers right between OFCOM and the Secretary of State in determining those prices? If you fear lobbying on technical matters, you are also going to get lobbying on prices from the public sector, are you not?
  (Professor Cave) I understand that the system that is proposed is broadly the system that operates at present under the Wireless Telegraphy Act 1998, and that is the system by which at the moment the Radiocommunications Agency establishes a price under the ministerial guidance associated with the implementation of policy in this regard, then sends the Bill to the department, the department obviously has the opportunity to see if it is being overcharged for spectrum which does not qualify under the arrangements, and that broadly speaking it pays up. That is the arrangement which I think ought to exist. Even though under clause 119 it is indicated that the payment is, as it were, made by the Secretary of State rather than demanded by OFCOM, I think that in essence if the current arrangements persist then the system for charging for public service spectrum will work.

  456. But if the system that is operated produced, say, for the Ministry of Defence a kind of fivefold increase in the charge, you do not think that the Ministry of Defence would go running to its Secretary of State and start pleading poverty and using its not inconsiderable influence to get the charges down?
  (Professor Cave) One of the aspects of the situation which I tried to emphasise in my report is that spectrum is simply an input into a whole range of production processes, and the Government has its own quite independent point of view of the level of output from those processes. In the case of defence spending, if the Government took the view that spectrum charging should be levied on the Ministry of Defence, then in my view, in order to maintain the appropriate level of defence services for the nation, it also ought to revisit the defence budget in order to ensure that the nation is buying the appropriate level of defence services. Obviously there is a risk in the arrangement that I have described that you end up with something like a money-go-round where the money goes to the Treasury and then it goes back to the Ministry of Defence. I discussed in the report in various places how you might try to produce a system which would ensure that there was an appropriate provision of all public services, including defence and public service broadcasting, but at the same time that there would be an incentive for the organisations involved to work in the long term to reduce their use of spectrum. It clearly does require the participation of the Treasury, particularly as it is the public spending agency in this process, because it has to co-operate in ensuring that the incentive system works, because if it is just a money-go-round you may as well not bother.

Lord Pilkington of Oxenford

  457. Do you think the money ought to be used for the benefit of the general public, like a question I asked earlier, to help the transfer from analogue to digital, for example? Should it go into a pot, in other words, and not go on the money-go-round that you describe?
  (Professor Cave) Broadly, if there were any savings as a result of more efficient use of the spectrum, then I think they should be used for the benefit of the whole population—it might be tax cuts or whatever.

Lord McNally

  458. How is this situation going to shake out? I am not experienced on spectrum, but I have some past experience of trying to get the Ministry of Defence to disgorge land, so I am scarred. The money-go-round is just the point that seems to put a flaw in your method of making the Ministry of Defence disgorge its spectrum, because what it will then certainly rush along and say is, "If we have to pay this spectrum price then there will be so many fewer tanks or so many fewer this, that and the other." They are expert as well at working out what will be the most painful thing for ministers to sustain to carry this through, so they will simply take from Peter to pay Paul, and you will not actually get them to disgorge the spectrum that they are hoarding, will you?
  (Professor Cave) What underpins the mechanism is the commitment by the Government of certain public spending targets over an extended period. So the footing upon which it would work would be that the Government takes a view as to how much spectrum the Ministry of Defence might appropriately need. It is difficult to do that, I acknowledge, but that could be a scheme that was developed over a period of time. It would then factor into the Ministry of Defence budget an amount to pay for that spectrum. If the Ministry of Defence found a whole lot of spectrum that it did not need, which it was able to hand back or to lease, or to do something of that kind, then that would be extra revenues available to the Ministry of Defence to spend. I understand a system like that works with the sale of Ministry of Defence land, and I am told by some people—although you have contradicted it—that it has in fact caused the Ministry of Defence to dispose of a certain amount of its land assets, on the basis that it has been able to keep some of the revenues from it. So it is absolutely essential to have that kind of regime in place.

  459. To come full circle to clarify this, you think that the Bill as written gives enough powers to do this, and that it does not need any strengthening of the OFCOM powers?
  (Professor Cave) When I first read 119 I was rather disconcerted that it seemed that the payment was voluntary, rather like those restaurants where they ask you to pay as much as you feel you need. Normally those do not last for very long, I think I am right in saying! However, on having taken further advice, I think that there are constitutional difficulties in entrusting to OFCOM a power to levy charges on government departments and on Secretaries of State. If that is indeed the case—and I am no legal expert—then the current wording which actually replicates, I understand, the arrangements which operate at present, does seem to me to be satisfactory.

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