Select Committee on Constitution Minutes of Evidence

Examination of Witnesses (Questions 936-939)




  936. Mr Vickers, Ms Boys, welcome. We are most grateful to you for being with us this afternoon and we know you are under some time constraints. The Committee has a copy of your paper, which you very kindly sent to us in advance. Is there anything you would like to add to that before we get under way or are you content for us to put questions based on your paper?

  (Mr Vickers) Thank you, Chairman. We are entirely in your hands. One point perhaps I could make by way of introduction is to say how I think the OFT compares with some of the sector regulators, who I know have given evidence to the Committee previously. There are of course many similarities but I think in some respects our tasks are somewhat different. First and most obviously is that our role is general rather than sectoral. There are some pieces of legislation such as the Consumer Credit Act where of course it is sectoral, but for the most part it is broad. Consistent with that, the main pillars of the legislative basis under which we now work are the Competition Act 1998, the Enterprise Act 2002 and a number of regulations in the consumer area which implement EC directives. A great deal of that is very new on the statute book so we as an organisation have been changing in all sorts of ways in recent years, notably in a corporate form sense. We have moved from the director general structure to a board structure, and with those new powers I think we are now much more transparent and accountable than used to be the case when the OFT's powers were different. The second difference, it seems to me, is that whereas the primary vehicle for much sectoral regulation involves licence conditions, our work under the Competition Act involves taking decisions which may be then subject to appeal to the specialist Competition Appeals Tribunal. The sector regulators, of course, have concurrent powers under that legislation and some others. In mergers, which of course is very important commercially and otherwise, we make reference or clearance decisions as to whether cases then go on to the Competition Commission. Under consumer law, it is mostly the courts who tend to make the decisions rather than us. We resolve many matters by negotiation short of going to court but can seek injunctions through the courts when necessary. So I think the ways of working are different in those respects. A final opening remark is that because we have such a diverse and broad range of responsibilities one of the challenges is to try to sum it up. We try to encapsulate what we are trying to do in a formula as follows, that it is all about trying to make markets work well for consumers, which I think reflects the view that a market which works well (which is to say competitively and with fair dealing) is always going to be a better regulator than any regulator.

  937. Fine. Thank you very much indeed. If I could start with a question which relates more to similarity than dissimilarity with the other bodies, that is in terms of structure in that you have now got your new corporate structure with the chairman and chief executive. I think I am right in saying you have been operating for six months?
  (Mr Vickers) That is right, since 1 April.

  938. So in so far as you can contrast it with what went before, what do you see as the main advantages of this new structure and how is it working?
  (Mr Vickers) I think given the powers and responsibilities which have recently come to the OFT, through new legislation, it has become simply anachronistic that all these decisions were taken in the name of the Director General., which I happen to be, but I think that no longer made sense with the new powers and responsibilities. I think a board structure brings all sorts of advantages. We have a board of seven: (you have the two executive members before you and the other five are non-executives) and I think there is the simple point that seven heads are better than one in relation to a number of questions, especially the strategy questions, which we have before us. As you say, we have been going with the new structure since April. We did quite a lot with the non-executives in the months preceding April that to make sure that we were all ready for the new structure to come into effect in a proper working way right at the start and my sense to date is that both through our board meetings and the other work which board members are doing for the OFT and in the OFT with a range of staff right across the office it has all gone very positively and happily.

  Chairman: Thank you very much.

Lord Lang of Monkton

  939. Mr Vickers, you made the point at the very beginning about the general nature rather than the specific nature of your body and this seems to me to create greater difficulties in terms of accountability and looking at the papers that we have had from you and from the DTI it seems to me that it is all a bit thin. The DTI paper seems to equate transparency with accountability. Of course transparency is part of it, of course it is important and the two Acts which now enshrine your activities do strengthen powers of appeal and introduce rights of consumer bodies for super complaints publishing an annual plan and so on. Do you yourself feel, though, that as you have a number a discretionary powers there should be some kind of auditing process? I am not talking about the financial audit because the PAC can handle that, but some sort of outside review of the way in which you have chosen to exercise your powers in the broad sense each year, or do you have any other thoughts about how accountability could be enhanced to the public?

  (Mr Vickers) Yes, I certainly agree that accountability and transparency are closely interrelated but different concepts. Without transparency there cannot be proper accountability, but accountability is more than transparency. I think in all sorts of ways the elements for accountability are there. If I could start with the example of the Competition Act. Section 60 of that Act requires consistency where relevant with the EC jurisprudence under competition law, and there are about four decades of jurisprudence; and we have the Competition Appeal Tribunal over us and the other enforcers of that Act. So that, through precedent and otherwise, imposes a number of tight constraints on what might, from a distance, appear discretionary. So I think that binds us in. and of course the body of law is not sector-specific, that it applies to competition matters in general. In respect of other powers too, as I mentioned with most of the consumer powers, it is the courts who are the final arbiters, though we succeed in resolving many matters short of that, and in areas where it is a question of whether a matter should be referred to the Competition Commission again we need to be properly transparent and accountable for our reference or clearance decisions, which in the merger area are themselves now appealable to the Competition Appeal Tribunal under judicial review principles to the Competition Appeal Tribunal. But again the question, if it is referred, is one which goes to the Competition Commission. So I think there are various bodies—the Competition Appeal Tribunal, the courts, the Competition Commission, as well as other kinds of scrutiny and general public scrutiny through Parliament and other means too which I think meet a number of the concerns lying behind your question.
  (Ms Boys) If I may interject, I think if you were thinking more of the strategic issue of the board deciding how we used our resources, what should be our priority areas, what should be our work programme, the new requirement to publish an annual plan—which we have consulted extensively with—on stakeholders at a meeting and then to produce an annual report where we report what has actually been done against the plan provides a good platform for anybody who is interested in holding us to account, of which obviously the Public Accounts Committee and the National Audit Office are one central plank.

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