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Noble Lords: Oh!

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Lord Peston: I agree that that is a pretty strong statement, so perhaps I should add "within the area which I have to consider".

It is certainly time to take stock of the regulatory process. It may well be that there is a group within the Department of Trade and Industry which does precisely that. I am interested to know whether that is the case and whether we may get a Green or a White Paper assessing the regulatory experience of the past decade-and-a-half and making suggestions with regard to the future. Perhaps the noble Baroness, Lady Miller, will be able to tell me whether there is such a group in the department.

I should also be interested to know whether the regulators tend to get together at joint meetings to exchange ideas. It would be interesting if they did. I should certainly like to know the outcome of any such meetings.

Looking to the future, another possibility is to establish a committee of inquiry. That might interest your Lordships because it is precisely the sort of area which one of our committees could consider. Yet another possibility, which is not incompatible with the others that I have mentioned, would be a large-scale academic study of the subject of regulation. Your Lordships will not be surprised to hear that suggestion from me because it would be a form of employment creation. Whichever way we do it, it would be a pity not to monitor or to learn from past experience.

It would be undesirable, but not unusual, to make policy changes without a full appreciation of where we are now and how we have got here. However, having said that I would not like to see a policy change without a firm research foundation, I am not insisting that the statutes under which the privatised industries and their regulators operate are perfect. Last year's consideration of the Gas Act in your Lordships' House convinced me that we must look again at all the relevant legislation.

In conclusion, my main desire is to end the debate on the note struck by the noble Lord, Lord Dixon-Smith, when he said that this is a subject on which we can have a meeting of minds. We can disagree, but our disagreements do not necessarily have to be ideological. In my view, they need not be ideological at all. This is a subject to which we can all contribute.

4.59 p.m.

Baroness Miller of Hendon: My Lords, this has been a most interesting debate, with excellent contributions from all noble Lords. I am certain that my noble and learned friend Lord Fraser, who is away on a trade mission, would have liked to be present to hear all the excellent contributions. Possibly your Lordships would have preferred that because he would be much more able than I to answer the points raised. For my part, I hope that I am able to do it justice. The noble Lord, Lord Peston, was right to say that the subject was extraordinarily wide ranging. My officials have given me so much information: although they believe that I am a fast reader, I would have to inhale all of the words to get through them. If I do not manage to mention all noble Lords who have spoken or cover all of the points

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that have been raised, I will look at Hansard and my notes to see what I have left out and reply in writing. However, I have never had to do that because I have managed to get through it.

The noble Lord, Lord Borrie, has made some interesting proposals on the regulation of British business and the protection of the consumer. I have also followed closely the wide-ranging and fascinating debate which has followed. As others have remarked, the noble Lord draws on a wealth of knowledge and experience, including as a long serving and greatly respected Director-General of Fair Trading. Other noble Lords have also brought us the benefit of their experience in the constructive and helpful points they have made. The Motion before us links regulation of business with protection of the consumer. I have no difficulty in acknowledging that there are circumstances where, at least in the short term, the interests of business and the consumer may diverge. Regulation may be the appropriate policy response. But it is all too easy to slip into the frame of mind which sees regulation as a cure for all ills. In most cases, competition is the more effective remedy. Competition is at the heart of the Government's economic policies, and our aim is to let it flourish. In regulating business, the Government aim for the greatest possible effectiveness in promoting competition and providing the necessary protection for the consumer while avoiding unnecessary burdens on business. In our approach to proposals in the European Union we seek to promote the same aims.

We must be careful to ensure that regulation does not inhibit competition or stifle entrepreneurial activity. Regulation, or rather over-regulation, must not be an excuse to interfere in the detailed decision-making of companies. The unhappy experience of nationalisation demonstrates the blind alley into which that philosophy sometimes takes us. Through privatisation we have sought to liberate whole sectors of the British economy from the unnecessary constraints imposed by government. There may be some who see regulation as a means of putting back the shackles. That is not the Government's position. Through the Government's deregulation initiative we have sought to strip away the dead hand of outdated, ill-fitting and often petty rules, or rules which, while once valid, are no longer relevant but remain unchanged through sheer lack of legislative or administrative time. Red tape is not just a nuisance. It puts a real cost on our economy--a cost in profits, jobs, investment and inefficiency.

Every extra burden placed on business drives up its costs. These costs fall disproportionately on the small businesses which are a major contributor to the UK economy. Unnecessary regulation also stifles innovation by adding to the time taken for new products to reach the market. Of course, it is the consumer who ends up footing the bill. Deregulation can also be of direct benefit to the consumer. For example, over 50 per cent. of shoppers now do their shopping on Sunday thanks to reform of Sunday trading. This means greater choice for consumers as well as business.

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As I said earlier, competition is at the heart of the Government's economic policies. It is competition, not regulation, which provides the best possible guarantee of value for money for the consumer. But make no mistake. The Government's steadfast promotion of competition through privatisation, liberalisation and deregulation does not mean that we are content to see the law of the jungle prevail, to use the words of the noble Baroness, Lady Seear. Consumer confidence is an essential element in the operation of an effective market. Consumers need to have confidence in the quality and safety of the goods and services which they buy. As we continue to dismantle barriers to competition, ensuring an adequate framework for competition law is of crucial importance. We are not content to rest on our laurels. The Government are conscious that certain aspects of the current competition law regime are definitely open to improvement.

We are committed to the introduction of legislation to prohibit anti-competitive agreements and to strengthen the powers of the Director-General of Fair Trading to deal with abuse of market power. The consultation paper published by the Secretary of State for Trade and Industry in March, to which the noble Lord, Lord Borrie, and other noble Lords have referred, underlined the Government's commitment to introduce meaningful reforms. They will provide further stimulus to the continued development of an enterprise economy where competition can flourish, while imposing the minimum necessary regulatory burden on business.

I am conscious that one of the most critical interfaces between the regulatory framework and the interests of consumers arises in the privatised industries. These utilities touch the daily lives of every single consumer throughout the country. It is therefore vital that they perform efficiently and provide top quality services. It was equally vital that they had access to capital resources for much needed investment without the constraint of the PSBR or having the Treasury constantly perched on their shoulders. Indeed, it was the desire to see improvement in the level of performance, investment and service which led the Government to privatise the utilities and introduce competition where feasible. A stable regulatory regime is crucial to overseeing the transition from nationalisation to competition and ensuring that consumers benefit from increased efficiency, lower prices and better quality.

I should now like to turn to the many points made by noble Lords in the course of today's debate. My noble friend Lord Kingsland and the noble Lords, Lord Borrie and Lord Ezra, have commented on the strategy of the Government for updating the framework of competition law in the United Kingdom. I have already referred to the major consultation exercise which the Government have launched--and about which my noble friend Lord Kingsland has made such generous comments--with a view to ensuring that our competition regime is equipped to deal with the challenges that face it. Perhaps I should say just a little more. The essence of these proposals is two fold.

First, we intend to replace the existing restrictive trade practices Act with a prohibition on anti-competitive agreements, such as cartels. The

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Government believe that this will be the most effective way to target genuinely anti-competitive behaviour. The new prohibition is along lines similar to the prohibition contained in Article 85 of the EC Treaty. It is a prohibition which has been adopted by many OECD countries, although the Government have been consulting on how to introduce reforms which will best suit our national interests.

Secondly, the Government propose to strengthen provisions in the fair trading and competition Acts to deal with situations involving abuse of market power. This will make it harder for dominant firms to shut out potential competitors. The Director-General of Fair Trading will be given stronger powers of investigation and powers to enable him to impose interim orders.

My noble friend Lord Kingsland and the noble Lord, Lord Ezra, have argued that the Government should introduce an EC-type prohibition on the abuse of market power. The Government recognise that there are shortcomings in the existing arrangements to deal with such abuse in the economy at large. In particular, where a business is damaged by an abuse of market power at present it is not possible for that business to seek a restraining order temporarily halting that behaviour while an investigation is carried out. But the Government remain to be convinced of the need to adopt a prohibition approach. There is a danger of inhibiting genuine competitive behaviour and stifling innovation and enterprise. We believe that the better approach is to strengthen the powers of the Director-General of Fair Trading to investigate and to provide him with powers to impose interim measures, giving a more certain and rapid response to abuses of market power. However, the strengthening of existing legislation now does not preclude the adoption of a prohibition approach at some future date if compelling arguments for it develop. The Government are calling for public debate about these issues. This does not and should not preclude action in the meantime to address weaknesses in the current regime.

The noble Lords, Lord Borrie and Lord Ezra, have criticised the delay in introducing the reforms. I believe that another noble Lord touched on the same point. The introduction of legislation is always subject to the parliamentary timetable. It is not always possible to bring forward every piece of reform as soon as ideally it would be desirable. Nevertheless, the recent consultation demonstrates the Government's continuing commitment to bring about a reform of the United Kingdom's competition law as soon as practicable. We are grateful for the support of the noble Lord, Lord Borrie, for the Government's deregulation initiative to remove unnecessary regulations on business. He rightly draws attention to the need for regulations to be fairly enforced. I welcome his support for the local business partnership scheme which the Government are actively pursuing.

The noble Lord, Lord Borrie, also mentioned the decisions last month of my right honourable friend the President of the Board of Trade on the MMC reports. My right honourable friend considered the reports very carefully. As he made clear, he also took into account

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the advice of the Director-General of Fair Trading, the views of the Director-General of Electricity Supply and the dissenting note in the MMC report. My right honourable friend the President of the Board of Trade explained the reasons for his decision in his announcement on the 24th April.

The noble Lord, Lord Borrie, suggested that trials of gas competition in the West Country have not gone well. Consumer interest is strong. About 35,000 consumers have already signed up with new suppliers--5,000 within the past fortnight. We have ensured that customers have a right to cancel should they wish to do so.

My noble friend Lord Kingsland queried the need for a system of penalties imposed by an administrative body rather than recourse to court action. The Government recognise the importance of private actions and see a role for administrative action and a court system for dealing with anti-competitive agreements.

A number of noble Lords suggested reforming those institutions currently responsible for implementing UK competition policy--the Office of Fair Trading, the MMC and the Department of Trade and Industry. As noble Lords will know, the Government are far from complacent about the state of competition law. A number of practical steps to reinforce the powers of the competition authorities are the subject of the Government's consultation paper on competition law reform. We see no benefit to be gained from a radical overhaul of the institutional framework. Of course the sceptics cannot believe that the existing tripartite structure can work without causing confusion and bureaucratic delay. But the current set up ensures a clear and rational delineation between the tasks entrusted to the Director-General of Fair Trading, the MMC, and the Secretary of State for Trade and Industry. That well-ordered distribution of roles provides the scope for the necessary checks and balances to operate. We believe strongly that the existing structure represents a healthy institutional balance, and one which operates in practice as a constructive and responsible partnership.

The noble Lord, Lord Peston, cast doubt about the effectiveness of the MMC. I cannot accept the description of the MMC that he put forward. In the overwhelming majority of cases the Secretary of State accepts the findings of the MMC. The combination of the specialist expertise of its members and the experience of its full-time staff provides a sound basis for thorough and well-argued conclusions. The noble Baroness, Lady Seear, wondered about part-time members of the MMC. For a short while until I came here, I was a part-time member of the MMC. When one has experience in business as a businesswoman and as a consumer--as we all are, as the noble Baroness said--and have to face the day-to-day problems, it is a good thing to have part-time members. They do not sit in their ivory towers.


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