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Standing Committee E
Tuesday 5 February 2002
[Miss Ann Widdecombe in the Chair]
The Chairman: I remind all members of the Committee that mobile phones and pagers should function silently or not at all.
Management of OFCOM
Question proposed [31 January], That the clause stand part of the Bill.
Question again proposed.
Miss Anne McIntosh (Vale of York): I regret that this is our last day, but I am sure that Committee members will contain their disappointment about the fact that we are not to convene after today.
The clause is about the management of Ofcom. We are disappointed that we did not succeed in gaining the Committee's agreement to decisions being made public, so I shall take this opportunity to examine how Ofcom should manage its affairs.
The clause and the explanatory notesI shall quote from the clausetell us that Ofcom shall
''in managing their affairs, have regard . . . to such general guidance concerning the management of the affairs of public bodies as OFCOM consider appropriate; and . . . subject to any such guidance and only to the extent that they may reasonably be regarded as applicable in relation to a statutory corporation, to generally accepted principles of good corporate governance''.
It is appropriate that the reference to those principles has been added.
The White Paper states in chapter 8, on page 77, that
''OFCOM will ensure that regulation is effective.''
We should take the opportunity to define and discuss what ''effective'' means and should be for the purposes of Ofcom. The White Paper continues:
''To achieve this aim it''
''will develop and maintain the necessary regulatory rules, in full consultation with industry and representatives of citizens and consumers''.
Clause 3 does not specify how that consultation will take place. We are then told that those rules will be developed
''within a broad framework of guiding principles established in statute'',
and that there are to be
''transparent and effective appeals processes.''
Good management is required to achieve all that, and the management will need to follow good management principles.
The White Paper tells us that Ofcom's
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''work on content issues should take into account a wide variety of interests and reach consensual judgements. It will resolve any conflicts between its content-related objectives and its other objectives in a clear and transparent way . . . the quality of its staff will be vital to the delivery of its functions. It will require sufficient managerial and financial flexibility to retain and recruit the necessary highly skilled managerial and professional personnel in competitive labour markets.''
The Minister helpfully told usit seems some time agothat
''There are currently 1,111 employees among the five regulators, and the total cost is £118 million.''[Official Report, Standing Committee E, 29 January 2002; c. 115.]
Some of the regulators are larger employers than others, with the Radio Authority being the smallest. I assume that £118 million is the figure for one year. As we are debating the management of Ofcom, I would like to question the Minister further about precisely how many staff he envisages the new regulator having. I will return to that in a moment.
At page 80, the White Paper states that Ofcom
''will operate in accordance with the best principles of corporate governance''
as referred to in clause 3''and better regulation.'' We should therefore consider the principles of better regulation. On page 13 of the report of the better regulation taskforce, which I obtained from the Library, the principles of good regulation are set out in a checklist. Outlining the principle of transparencya theme that is referred to in several different reportsthe taskforce's list states:
''The case for a regulation should be clearly made and the purpose clearly communicated. Proper consultation should take place before creating and implementing a regulation . . . Regulations should be simple and clear and come with guidance in plain English.''
On the principle of accountability, the list states:
''Regulators . . . should be clearly accountable to government and citizens and to parliaments and assemblies.''
The Committee has already debated those matters to some extent. The list continues:
''There should be a well-publicised, accessible, fair and efficient appeals procedure.''
On that point, the Opposition have been disappointed. The Bill does not tell us what publicity will be given to the new body's decisions, how accessible the management and the board will be, or what the appeals procedure will be. We would like the Minister to elaborate on those subjects.
Under the heading of proportionality, the better regulation taskforce states that
''Compliance should be affordable to those regulatedregulators should 'think small first'.''
That probably applies to all the activities of Government. The taskforce goes on:
''As far as possible, a light regulatory touch is used, with strict penalties when failures occur.''
The Opposition tabled a deregulatory amendment, but unfortunately it has not been selected for debate. Among those who have contacted us about the Bill there is a groundswell of opinion that it should emphasise a light regulatory touch. However, we are not told how such a light touch is to be achieved, or what strict penalties will apply when failures occur.
The better regulation taskforce also refers to consistency, stating that
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''New regulations should be consistent with existing regulations.''
That is acutely important. The Bill is silent on how Ofcom, working with the existing regulators, is to ensure that the new regulations are consistent. In my view, the new regulations should replace the existing ones rather than coexist with them. The taskforce also states that
''Departmental regulators should be consistent with each other.''
The Bill fails to define the relationship between the two relevant Departments and Ofcom in terms of the management of the regulator. It is also silent on the responsibilities of the two Departments in monitoring the shadow Ofcom.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Dr. Kim Howells): I would like confirm that, as I said in a previous debate, the relationship between the Department of Trade and Industry, the Department for Culture, Media and Sport and Ofcom will be nothing less than harmonious and productive.
Miss McIntosh: That will certainly make me sleep easier at night. However, it is important not only that their relations should be harmonious but that the Bill should specify their precise nature.
The final principle that the better regulation taskforce sets out is targeting. First, it states that:
''Regulations should be aimed at the problem and avoid a scattergun approach . . . Where possible, a goals-based approach should be used, with the enforcers and those being regulated given flexibility in deciding how best to achieve clear, unambiguous targets.''
Again, we come back to consultation. Ofcom is to prepare for its main task of replacing the regulators under the shadow of the imminent communications Bill, but we are not told what the relationship between Ofcom and the regulators is to be. The Minister did not respond warmly, coolly or even lukewarmly when I expressed the fear that for a year or 18 months we will have six regulatorsthe existing five plus Ofcomrather than the existing five being replaced by Ofcom.
Dr. Howells: I must have tried to reassure the Committee on this point on 10 or 12 occasions. If the hon. Lady reads the Bill, she will see that the creature that we are creating will have no regulatory powers until Royal Assent is given to the communications Bill, when the transfer becomes complete.
Miss McIntosh: Is the Minister suggesting that Ofcom is to have no relationship with the existing regulators? That is what I was saying, albeit apparently not as directly or eloquently as the Minister wanted. If Ofcom is to have a relationship with the five regulators, we ought to know how it will be organised.
Secondly, on targeting, the taskforce says:
''Where possible, a goals-based approach should be used, with enforcers and those being regulated given flexibility in deciding how best to achieve clear, unambiguous targets.''
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Thirdly, it states:
''Regulations should be reviewed from time to time to test whether they are still necessary and effective. If not, they should be modified or eliminated.''
I hope that the Minister will confirm that will be one of the management requirements of clause 3. The better regulation taskforce helpfully elaborates on what is intended.
The explanatory notes, at paragraph 18, state:
''Guidance on the running of public bodies includes that provided by the Cabinet Office, for example the Guidance on Codes of Practice for Board Members of Public Bodies (February 2000). Principles of good corporate governance are set out in the Combined Code published by the Committee on Corporate Governance in June 1998, which combines the provisions of the Cadbury and Greenbury codes on corporate governance with Committee's own work. Since guidance on the management of public bodies is more likely to be relevant to OFCOM, it will take precedence over principles of good corporate governance.''
That begs the question. What does the guidance on codes of practice tell us? Although the explanatory notes are helpful in other respects, neither they nor the Bill elaborate.
I have obtained from the Library a copy of ''Guidance on Codes of Practice for Board Members of Public Bodies''. It sets out a model code of practice for board members of executive non-departmental public bodies and similar organisations. It is intended to provide a framework, which the public bodies concerned should use. They should agree necessary modifications with their sponsoring Departmentthere are two sponsoring Departments for the Billto take account of their own characteristics and circumstances.
The guidance sets out several principles of good practice, the first of which relates to public service values. When the Minister sums up, will he confirm that the Government intend such values to apply in clause 3? The guidance states:
''Public bodies and their boards must at all times . . . observe the highest standards of propriety involving impartiality, integrity and objectivity in relation to the stewardship of public funds and the management of the bodies concerned''.
They should also ''maximise value for money'', a theme to which I shall return. Several of the regulators and of those regulated have said that they are less concerned that Ofcom will not give value for money, than that it will not seek the most economical and efficient way forward or apply cost-saving measures, as Opposition Members hope it will.
In keeping with the guidance, Ofcom should also ''be accountable to Parliament'' and to ''users of services''. We have had several representations from those who are not satisfied that Ofcom will be accountable to them. Ofcom should also be accountable to
''individual citizens and staff for the activities of the bodies concerned, their stewardship of public funds and the extent to which key performance targets and objectives have been met.''
The guidance goes on to say that public bodies must,
''in accordance with Government policy on openness, comply fully with the principles of the Citizen's Charter and the Code of Practice on Access to Government Information.''
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The key paragraph sets out guidance on the relationship with the sponsor Department. It states:
''The Minister of the relevant department is answerable to Parliament for the policies and performance of all public bodies sponsored by the department, including their use of resources and the policy framework within which they operate. The respective roles of the sponsor department and the public body should be set out in a Framework Document, Management Statement or agreed Memorandum of Understanding. In the case of grant-aided bodies, this information should be supplemented by a Financial Memorandum specifying the terms on which the body receives and spends its funds.''
That raises an important question, especially in connection with clause 3. Does the paving Bill constitute one of the documents mentioned in the guidance? Should there be, or is there, a framework document that complies with the specification in the guidance? We require satisfaction from the Minister because although the guidance is clear on the issue, clause 3 and the explanatory notes are silent about it. I therefore welcome this opportunity to question him and to seek satisfaction.
The guidance goes on to refer to the role of the chairman, saying:
''The chairman has particular responsibility for providing effective strategic leadership''
on certain matters. He
''should ensure that the board meets at regular intervals throughout the year'',
which begs the question of how often it should meet. The guidance continues:
''Communications between the board and the Minister of the sponsor department''
or Departments, in Ofcom's case
''will normally be through the chairman except where the board has agreed that an individual member should act on its behalf.''
Like, I am sure, other Committee members, I have received several representations from those who are deeply concerned that the Bill does not elaborate on any of those points. The guidance states that
''The chairman should ensure that all members of the board, when taking up office, are fully briefed on the terms of their appointment and on their duties, rights and responsibilities.''
It proceeds to deal with the corporate responsibilities of board members, strategic planning and control, delegation on the part of board members who serve part-time, the responsibilities of individual board members and the handling of conflicts of interest.
The key issue is that we must know whether the paving Bill is meant to act as
''a Framework Document, Management Statement or agreed Memorandum of Understanding''.
Is there a framework document or, indeed, should there be one? Should an appropriate body, such as the Select Committees that shadow the Department for Culture Media and Sport and the Department of Trade and Industry, have the opportunity to review that provision?
I mentioned that we have received several representations from external bodies. I would like to share their concerns with the Committee. In connection with clause 3, ITV welcomes the logic of the merger of the five regulators to address the unnecessary regulatory overlap. However, it goes on to warn of the danger that Ofcom will become an
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umbrella body for the existing five regulators, for the reasons that I set out last week. ITV also believes that a small board of swift and effective decision makers is a good thing in a fast-moving industry.
ITV believes that a duty should be placed on Ofcom to consult the industry about any internal working arrangements and structures that it proposes to create. Although ITV supports the need for Ofcom to have the flexibility to adapt its organisational structure, it says that it is important that the industry is given an early opportunity to comment on any initial blueprint. As I mentioned earlier, the requirement for such consultations is set out in both the better regulation taskforce report and the explanatory notes.