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Lord Kingsland: My Lords, I am perfectly happy for the noble Lord, Lord Ezra, to continue if he wishes; indeed, I do not feel any sense of precedence at all. I see that the noble Lord does not wish to continue. I am much obliged.
I should like, first, to congratulate the noble Lord, Lord Borrie, on initiating today's debate. He brings to it not only a formidable academic reputation, but also many years of experience as a Director-General of Fair Trading. From listening to the noble Lord, I must say that all that experience has come through in his speech. I should also like to congratulate the Government on their initiative in March of this year in producing not a Green Paper but a blue one entitled, Tackling Cartels and the Abuse of Market Power. I believe that it is entirely appropriate that it should be blue and not green, and I should like to address my remarks to the content of that paper.
The truth is that the dominant feature on the landscape of British competition law is the European Community, and has been so since 1972. That dominance is the consequence of two articles in the Treaty of Rome--Article 85 and Article 86. The first article deals with contractual restrictions and the second with monopolistic powers. They have direct effect on the territory of the United Kingdom. If an individual or an enterprise feels in some way restrained by the behaviour of an enterprise contrary to those articles, that individual can go to any court in this country and seek relief. So they are formidable weapons in the hands of the European Community. But they only apply to restrictions or monopolies which have a consequence for inter-state trade. Therefore, there is an important role for competition policy at national level. It has been a fact that our arrangements to date have not borne any relation to the prohibitions laid down in Community law.
The more controversial area relates to Article 86 on monopolistic--and what I think is called in the economics profession oligopolistic--practices. Here the British system is different to the Community system. I am somewhat concerned to see that the dovetailing approach taken in relation to Article 85 is not to be the approach taken in relation to Article 86. I urge Her Majesty's Government to look at this preliminary conclusion carefully before including it in legislation. I see no reason why, if a contractual arrangement which restricts trade under Article 85 is to be prohibited, a similar prohibition should not apply to a monopolistic or oligopolistic practice under Article 86. It is an important point of principle. We shall lose an important legislative opportunity if we do not take that opportunity to dovetail the two systems exactly.
I have one final comment to make. Why do we need an elaborate set of institutional and administrative arrangements to administer competition policy? If we are to prohibit restrictive agreements, why do we not simply leave it to the injured party to go to the ordinary courts of the land and claim that an agreement or a practice is void, and demand damages? There is some suggestion in the recent comments of the European Commission that this is the direction in which the European Community itself is going. The reason is simple. The administrative arrangements for examining monopolies in the European Community are snowed under. Some companies which seek permission to operate certain agreements are having to wait years before they can find out whether or not they have obtained it.
I am not saying that we should not do this. As long as it is our intention to fine wrongdoers, we have to have a system which gives the alleged wrongdoer every right to defend his position and to prove that his agreement is lawful. If we do not do so, we shall be caught out by the European Convention on Human Rights. As long as there is the prospect of a fine, which is a criminal penalty, that follows.
We are faced with a fundamental question of principle here. If we want as simple a system as possible operated by the civil courts of the land, we must accept that a fine is not an appropriate penalty for a company engaged in a monopolistic or a restrictively concerted practice. Of all the questions that the Government have to consider before this legislation is put into place, I believe that is the most fundamental.
Lord Ezra: My Lords, I apologise to the noble Lord, Lord Kingsland, for having tried to speak in advance of him. I was so anxious to congratulate my old friend Lord Borrie that I got quite carried away. I now wish to express appreciation to the noble Lord, Lord Borrie, on his remarkable speech, bearing in mind his great experience on the subject. I am pleased that I heard what the noble Lord, Lord Kingsland, had to say because I agree with a great deal of it. The first three speeches in this debate at any rate will show a remarkable degree of consensus.
I start from the thesis that the best safeguard for consumers is the provision of goods and services in a competitive market. However, it is necessary to ensure that the competition is fair, that monopolies do not distort the market place, and that standards of health, safety and quality are maintained. It is the task of government to put in place the machinery to ensure that those objectives are achieved. I feel that the purpose of our debate today is to examine whether that machinery is adequate or whether it is in need of change or amelioration. That it exists of course there is no doubt; the question is, could it be made to work more effectively? I believe that the answer is in the affirmative as regards the three cases that I shall mention and which the previous speakers have already touched on.
In the case of competition policy, as the noble Lord, Lord Borrie, pointed out, it is now getting on for seven years since the Government produced their White Paper--now diminished to a consultative document--pointing out what needs to be done. There is no doubt in the Government's mind--as stated in this blue document--that the law needs to be changed. That is admitted on all sides. I agreed entirely with the noble Lord, Lord Kingsland, when he welcomed what the Government are proposing to do in regard to Article 85
There is also the question--which has been debated for a long time--as to whether the OFT and the MMC should be brought together, or in some way modified. The case for bringing them together was pressed strongly by the Trade and Industry Select Committee in the other place, to which the noble Lords, Lord Borrie and Lord Kingsland, referred. The Select Committee pointed out clearly--and I thought convincingly--how they thought this could work. That is a matter which must be taken seriously. However, if it is decided that it is better to have two separate bodies, their roles and their functions need to be looked at again. This morning the CBI produced some ideas on the subject which certainly merit serious consideration. In the whole area of competition policy there is undoubtedly a need for change. The Government have anticipated some needs but, in my opinion--it is a belief shared by the previous two speakers--they have not gone far enough.
I turn next to trading standards with which the noble Lord, Lord Borrie, and I have had a close association. He is the current president of the institute; I was the previous president. There is no doubt that the trading standards organisation throughout the country is doing a remarkable job, and is recognised throughout the world as having done so. It leads the way. However, unfortunately the great skills which those dedicated people possess are gradually being eroded by the reconstruction in local government which in its train brings fragmentation.
It is the nature of trading standards these days to deal with many things of great complexity, such as counterfeiting, fraud and the operations of large multiple concerns. To consider that those matters can be dealt with at very low local level is totally misguided. We need to think again about the structure of the trading standards organisation. We need to ensure that there is a regional level at which these important strategic issues can be dealt with, as well as being supported at local level in giving advice to individuals and small firms. I believe that in that area, too, we need to be aiming for amelioration of the existing system.
Finally, I turn to consumer protection in the privatised industries--a subject on which, as the noble Lord, Lord Borrie, pointed out, I touched in the debate that I introduced in December. Here, too, we must look again at the issue. What is becoming very apparent, in particular in relation to the energy sector, the gas and electricity sectors, is that they are moving closer together. The gas distributors are distributing electricity; the regional electricity companies are all distributing gas; and, therefore, the time is coming
The noble Lord, Lord Borrie, referred to the report prepared by the Devon County Council. I have a copy here. It points out that consumers who wished to make complaints went naturally, first, to their supplier. But if they did not receive satisfaction from their supplier, none of them thought of going to the regulator in the gas or electricity industry, or to the consumer councils. Apart from gas, they had not heard of them anyway. Those individuals tended to go to the local authority, the citizens advice bureau or the trading standards officer. Therefore, either we need an effective consumer council in those industries or none at all. I believe that we are in a half-way house where no effective use is being made of those bodies because people do not know about them. That comes out extremely clearly in the report that I hope the noble Baroness has read with care; and on which I hope that she will comment.
We have in place regulatory bodies to deal with market distortions and consumer interests. However, we need a sharpening of those operations; and I have indicated some of the ways in which I believe that that should be accomplished.
Baroness Lockwood: My Lords, I thank my noble friend Lord Borrie for the comprehensive way in which he introduced the debate. I shall follow the example of the noble Lord, Lord Ezra, and concentrate my remarks on the privatised utility industries. Those industries are of vital importance to our economy and have a strategic interest for the nation as a whole. Hence the reason for their being in public ownership previously.
There are four players in those industries which the regulator needs to take into account: the shareholders; the customers; the workers; and the state or the Government as guardian of the national interest. Any regulatory system has to balance the interests of those groups. Sometimes one group may be of overriding importance, but generally the interests need to be kept in balance. That is not perceived to be happening at present. Consequently there is great dissatisfaction with those industries and with the regulatory system. Customers or consumers are very critical. People believe that too much weight has been given to the shareholder interest, in particular at director and senior management level, at the expense of the customer or consumer.
A regulatory system inevitably contains contradictions and tensions. That seems to reflect the contradictions in the Government's own policy. Deregulation was a corner-stone of that policy. Yet even the Government recognised that in privatising those utility industries unfettered market forces could not be trusted to safeguard all the interests. Hence we had a regulatory system attached to each privatisation Bill.
As regards mergers, in reference to the consideration by the Monopolies and Mergers Commission of the bid for Northumbrian Water by Lyonnaise des Eaux, the regulator of Ofwat argued that the merger would be against the public interest as it impaired his ability to carry out his statutory functions by reducing the number of comparators.
The question arises as to where the final power lies in the whole regulatory system. The regulator's advice was overturned by the Monopolies and Mergers Commission. In turn, as has already been said, recently the commission's advice on the electricity industry was overturned by the Minister. So we must ask whether the powers and authority of the individual regulators are strong enough, where the balance of power lies between the different regulators and where the final policy decisions are made. Both my noble friend and the noble Lord, Lord Ezra, referred to that. We need to know whether decisions are being taken within a consistent framework of government policy. That seems not to be so.
The third group of interests or stakeholders, the workers, is one where the full brunt of the Government's deregulation policy has been felt. No one wants an industry--a utility industry or any other--to be run solely in the interests of the workers. But the workers are stakeholders and have a legitimate interest. Enlightened government and enlightened companies recognise that and build it into their policies. As a result, the workers accept that they are partners and therefore have a vested interest in the success of their company.
The fourth partner is the Government or the national interest. I do not regard myself as a xenophobic nationalist, but I cannot help questioning whether the takeover of utility companies, especially by overseas companies, is in the interests of the country and of our economy, bearing in mind the importance of the industries to the social structure. We also bear in mind that many overseas companies now see the British system as lightly regulated and one where the profit motive can be of great significance.
Baroness Wilcox: My Lords, I am grateful to the noble Lord, Lord Borrie, for introducing the debate. Of course, he is familiar to me, since I worked with him when he was Director General of the Office of Fair Trading. As Chairman of the National Consumer Council, I spoke to him on many occasions. We did not always agree but he always listened to me and I hope that today will be the same.
I stand today as a businesswoman, a trader, a consumer representative and a consumer. I believe that free markets are the best markets. When they work well, free markets are wonderful for consumers; when they work well, they give us access, choice, safety, information, equity, redress and representation. But the world is not a perfect place, and sometimes it is necessary to interfere with and regulate the market to keep the balance of power between business and the consumer.
Britain has a long tradition of self-regulation which has been much admired and often emulated: that badge of trust we knew, the handshake of the City of London dealers, the codes of practice of professional bodies; of the guilds; of the societies; fiercely guarded and upheld. But I suspect that, as all national boundaries are blurred by international trading, technology and science, those voluntary codes will, perforce, be replaced by statutory codes with a much wider geographical application. Regulation and enforcement will have to be and are even today being looked at anew.
More and more in these fast-changing days, businesses recognise their need for regulation. At the Institute of Directors' recent conference on the subject, representatives of 800 small companies attending called for more and better regulation in areas like retailing, wholesaling, tourism, the licensing trade and, inevitably of course, car boot sales. They recognise that good regulation can help to improve quality standards and business performance.
However, implementation and application are causing such businesses great concern. They are looking for more clarity, for the law to be written in plain language that they can understand; better on-going information to aid compliance; fairness of application of regulation; a European approach to applying European directives reflecting the spirit rather than the letter. My noble friend Lord Kingsland has already alluded to that. At a cost to UK business of £43 billion a year, regulation must be necessary, effective, fair and meet consumer and industry demands.
But I believe that in future it will be much more difficult to achieve. We live in an increasingly complex world where science and technology are moving markets and consumers into areas and languages that none of us is fully able to comprehend. There are many new forces at play, huge amounts of capital roaming the world, free-wheeling supranational companies, often more powerful than the governments of the countries in which they manufacture, trade or consolidate, able to influence and alter local conditions. New challenges to the regulation of British business are upon us, as this timely debate proves.
With your Lordships' permission, I shall mention three areas where we can see the changes happening. First, on technology, there are many significant changes taking place in the industry. The development of the information superhighway could bring enormous benefits to us all, particularly those with disabilities who cannot leave their homes or who live in remote, rural areas. The information society will fail to deliver its full potential unless consumers have effective systems of regulation and representation to ensure that the information society develops in ways to benefit everyone. There is no regulatory structure for the technology at the moment.
There are many bodies involved in the regulation of broadcasting and telecommunications. But technologies are changing. Telephone, television and computer can now work together across frontiers. Our Government acknowledge the need for review of the regulatory structure for broadcasting and telecommunications. But what of the information technology? How soon do the Government think they should start a review? It will be a long and complex picture and the sooner we start it the better.
Secondly, there are new risks. New challenges arise from new diseases such as BSE. The Government's responsibility is to introduce appropriate regulatory measures to protect humans from the disease. The Government introduced a number of measures, including the offal ban, as we remember. They relied on it to protect the human food chain from tissues known potentially to harbour BSE infectivity. It is important that such measures are properly monitored and enforced. It is welcome news that that is happening. But there will be new risks, and the need to ensure that regulations are properly monitored and enforced will have to be well supported, both nationally and locally.
Thirdly, and finally, on the green claims the Department of the Environment commissioned the National Consumer Council to look into them and we discovered that most of the claims are vague, devoid of meaning, often accompanied by symbols or logos and other green imagery which none of us really understands. We are keen to encourage shoppers to buy products which are less damaging to the environment; and I am delighted that the Government have now said, in the light of the National Consumer Council's report, that they will help to instigate a code of practice on the marking of "on product" claims. They will consider possibilities for changing the legislative framework for helping to protect the consumer against misleading information.
That is a welcome response, but as the three brief examples show, regulation will be no easy task in the future. Businesses, government agencies and consumer bodies will have to form new alliances--more often, much earlier and more openly--if we are to regulate, where necessary, to achieve the balance whereby British business can flourish and the British consumer remains king.
The noble Baroness, Lady Wilcox, spoke of the convergence of broadcasting and telecommunications. What she did not say is that at least 10 different agencies have regulatory responsibilities for different aspects of telecommunications and broadcasting. With 10 different agencies, it is difficult for businessmen and consumers to find out what the current regulatory principles are. That gives rise to a whole new industry dedicated to second-guessing the regulator. We must move the debate forward and see how regulation can be applied to the real problems of the economy. I thank my noble friend Lord Borrie for giving us the opportunity to do so.
To move the debate forward, it is obvious that in some sectors more regulation is needed and in others less. A flourishing, dynamic economy is moving all the time; so the need for more or less regulation will be constantly changing. My noble friend Lord Borrie suggested that to introduce competition alone is not enough. He is absolutely right. Good regulation will improve the quality of competition; and that will improve the economy as a whole.
Regulators are obliged to control prices, encourage competition and look after the consumer. Let me briefly examine each of those duties in turn. In recent months, difficulties have appeared with the RPI-X price cap system. Takeover bidders and the stock market seem to think that this formula leaves a lot of scope for excessively high profits and excessively high executive pay and perks. They seem to be right. During the period 1991-94, Oxford Economic Research calculated that the average total return to shareholders of the regional electricity companies was in excess of 38 per cent.; whereas the average total returns calculated on the same basis in the Financial Times All Share Index has been just under 16 per cent.
That price formula is further complicated by the fact that many costs are outside the control of the utility. For example, we have heard from the Government all about lower gas prices. But they are not the result of privatisation or competition only. They are lower mainly because the price of gas itself has gone down by 50 per cent. Similarly, electricity is cheaper, largely because the fuel that drives the power stations has gone down in price. Telephone charges are less, partly because of competition introduced by the Government, but also because fibre optics and computerisation have cut costs considerably. What has regulation done? It has speeded up the passing on of those price reductions to the consumer. And that brings me to the second task of the regulator--competition.
As other speakers said, we have been promised a government policy for competition since the mid-1980s. At last, in March this year, the consultation document appeared. There is no doubt that the burden of regulation has been greater than it need have been because of the absence of a competition policy. Instead of vigorously introducing competition policy in the early days, the Government have used regulation as an excuse to delay it. I thought my noble friend Lord Borrie was rather kind to the Government in his comments on that. To privatise monopolies for the purpose of introducing competition, and then for the Government to produce their policy for competition many years later, is an example of incompetence on quite a grand scale.
For some time the utilities regulators have warned that existing laws are insufficient to control the powerful groups that they oversee. Referring decisions to the Monopolies and Mergers Commission now seems to add to their difficulties. The Secretary of State's decision, first of all to accept the MMC's recommendation and allow mergers in the electricity industry, and then, contrary to the recommendation, to block bids by National Power and PowerGen for electricity distributors, has only served to emphasise that uncertainty.
In reply to the Question tabled today by the noble Lord, Lord Ezra, the Minister said that using "golden" shares to block those bids was not confusing. He may be right. But it is certainly weak and indecisive government.
Let me give an example of the absence of effective regulation. The Government own the Post Office and are successfully exploiting its monopoly in the absence of regulation by taking out £925 million over the next three years, which effectively means that they are taking every pound earned by the Post Office. Inevitably that means that postage prices will be raised. Would a regulator in the private sector have allowed that? I doubt it.
The third person the regulator is obliged to look after is the consumer. I assume that "the consumer" means the domestic user, and particularly those on low incomes. Apart from to the elderly and the disabled, the social obligations of the privatised utilities are pretty minimal. They are mainly an obligation to provide universal service in gas and to satisfy all reasonable demands for electricity. How do the Government ensure that small users are not paying high prices by virtue of standing charges and that consumer rights are protected?
Regulation has increased as our life becomes more complicated. We have arrived at the position today whereby, if eating beef is risky, we do not blame those who fed infected sheep carcasses to cows or ignored regulations in abattoirs. No, we hold the Government responsible by virtue of their poor regulation.
The state as provider is being replaced by the state as regulator. That demonstrates the futility of the government slogan that more regulation is bad and less regulation is good. The reality is that, as life becomes more complicated, we come to depend more on regulation because we cannot control everything ourselves.
Lord Dixon-Smith: My Lords, like everybody else I welcome this debate. Indeed there is almost a danger of our arriving at a state of sweetness and light over the whole subject. I intend to take a slightly different tack.
I well remember, some 12 years ago, landing at Dover late one evening on returning from a foray into France, and finding myself listening to an old friend on the radio as I drove up the A.2. It is somewhat ironic that, had he made it to this eminent place, he would have been sitting on the Benches opposite. The subject under debate was then very topical. It was the question of the regulation of the City. It is a very big subject, and not one that
The substance of his argument was that no regulation could replace that system. He said that you could bring into being all the regulators you chose and could give them all the legal powers that could be created, backed by the courts; but if the system of morals and ethics in business were not adequate then the regulators could not take their place.
We should do well to remind ourselves that all the regulation that has come into being since that time has not prevented malpractice. It cannot. Occasionally it takes steps to bring it under control. But somewhere in all of us there is--heaven help us!--what I call the schoolboy ethic of testing the limits of what is permitted. We need to bear in mind when considering the issue of regulation that, if our education system--we go right back to that--is not inculcating people, as a matter of instinct, with sound basic moral and ethical principles, particularly in matters of business but of course in all matters, then we certainly have a problem. Education is not the subject of our debate today. Nonetheless, it is relevant to it.
My second point is that, if one has those standards, regulators and regulations change nothing. I shall use two simple examples which are matters of law rather than regulation as such. I well remember that in my time in local government we were required to have a debate about employment policies because of the impact of the race relations legislation. The employment practices in County Hall were quite simple: the best person available for the job was employed. In those days, County Hall employed some 50,000 people, though there were--I cannot remember exactly--several hundred and probably a thousand separate employing establishments, all working on that system.
The law was passed and there had to be an employment policy to deal with the question of race. So a standing committee solemnly considered the matter; a paper was solemnly produced; and a policy was solemnly adopted and sent to every employing establishment. Everybody involved in employment was aware of it and they carried on doing what they had done before, which was to appoint the best person for the job. Exactly the same thing happened with the equal opportunities legislation, for quite obvious reasons. So it is legitimate to remind ourselves that the question of standards is fundamental.
Much has been made this afternoon of the problems of the privatised utilities, which often find themselves in a monopoly situation. The noble Lord, Lord Haskel, drew attention to that point. It has to be said that some of them have not always behaved in the most discreet and wise way. Although it has not been mentioned specifically this afternoon, I infer from what has been said that, despite the problems with the existing situation, it is preferable to the one that existed before when there were national monopolies, which were not subject to regulation but were subject to an enormous
Generally speaking, the performance record of the privatised utilities is vastly superior to their previous record. We should be pleased with the progress that has been made. I infer from what has been said that there is no intention of trying to return to the earlier position.
Business and commerce exist for only one reason: they have customers. They do not have a symbiotic relationship, each working for the other's best interest. There are very real problems. But with all the regulation in the world, I still know of no sounder advice to give to any customer than the old Latin phrase caveat emptor. My humble opinion of regulation is that it is rather like insurance: it is always too much when you do not need it and never enough when you want it.
Lord Desai: My Lords, we are very grateful to my noble friend Lord Borrie for having introduced this important topic. So far the speeches have displayed a range of specialist knowledge on the subject. It is a debate which we must read with great care when it is published tomorrow.
Basically, I have a total lack of practical knowledge in this matter but I want to use my academic knowledge to as much advantage as I can. Let me first say that traditionally British policy has to been to leave things well alone--laissez faire --rather than employ an active enforcement of competition. In that we differ from the United States. The United States believes in free markets but also believes in vigorous enforcement of competition policy. By and large we have let things be. We have been much more tolerant of cartels, for example, than we ought to be.
That said, we now have to operate within the context of European law, as many noble Lords pointed out. There is a difference between cartels, which clearly fall foul of Article 85, and other matters, such as misuse of market power, which come under Article 86. I want to point up the contrast between Articles 85 and 86.
What is said about Article 85 is fairly clear. By raising prices and through, as it were, collusion between suppliers, cartels clearly represent an area which ought to be regulated. I am less sure about "oligopoly", as described by the noble Lord, Lord Kingsland. The doctrines of monopoly, oligopoly, and so on, were invented by columnists at a time when markets were by and large domestic, industries were simple, and one could more or less say of a certain industry that it had three, four or five competitors. As noble Lords have pointed out, with the current state of technology and the tremendous mobility of capital, it is not at all certain that industries can be defined as easily as they were. We have already discussed today how, in the regulation of the public utilities in the energy sector, it would be very good to have a cross-fuel-source competition. There should be competition for gas, electricity and other energy sources. We should have a policy which allows for that--not merely a lot of competitors in one industry. We should all think about competition across energy sources. That is obviously a matter for consideration.
The House recently discussed broadcasting and the question of market power arose. How is market power measured? If one measures it in that sector--broadly speaking, the media sector--it is not enough to look at how many people are in the business of television production. One should go across to the print medium and other areas as well. So the notional market power that economists used to measure industry by industry and product by product may no longer be very relevant. There must be some new thinking about the relevant sphere of substitution across products. We must put forward a policy to promote competition in such a way that at the end of the process the result is an efficient, reliable and cheap supply of the commodity or service to the consumer. That is what we want. Rather than go by rules which say that there ought to be x number of competitors in the industry, we ought to ask ourselves how we achieve that result.
My noble friend Lady Lockwood said that she was not xenophobic but she did not like foreigners coming and taking over our industry. I am perhaps xenophilic, if anything. But we are in very much a global situation--a global competitive situation with an increasing degree of freer trade. For instance, in the 1950s people like the economist Galbraith used to think that the American automobile industry was oligopolistic and so powerful that it could control consumers. But once that industry allowed German cars to be imported, which were good competitors, its market power was undermined. Similarly, IBM, which was dominant in the computer industry, was undermined by a number of small personal computer producers.
Given the great amount of technology, if we do not restrict free entry and do not go down the path of protectionism much of what we want to achieve will be secured by competition between producers and by technological change. One good thing which may come out of this debate is that it is better to take a broader, more comprehensive view of industry and the economy rather than a sectional view. It is by competition across products and across industries that consumer interests will be better protected.
Finally, in relation to what was said by the noble Baroness, Lady Wilcox, when it comes to issues of health we need a tough regulation policy. It is important that we obtain as much understandable, non-misleading information as possible. I dare say that had beef been supplied by two or three firms, we would not have tolerated the situation that arose in respect of unsafe processes. Any decent corporation would have withdrawn the product long ago and improved its processing systems.
Lord Blease: My Lords, I commend my noble friend Lord Borrie for his initiative in tabling this timely and challenging debate. I wish to compliment him and other noble Lords who have so cogently and forcefully presented relevant arguments on the many issues directly concerned with corporate governance, business regulation and consumer protection.
Having had only a brief glance at the Department of Trade and Industry consultation document, Tackling Cartels and the Abuse of Market Powers, I am conscious that my contribution to the debate will be rather pedestrian. I propose to speak about some current provisions and measures concerning consumer interests and protection in Northern Ireland.
In addition to the various regulatory and law enforcement agencies which exist to ensure fair competition--to which reference was made by a number of noble Lords--it is important also to provide legislative arrangements that give an effective independent voice to consumers with adequate remedial action. Eleven years ago the Government established a General Consumer Council for Northern Ireland. Among the principles on which the council was founded was the need for a unified, comprehensive voice, the avoidance of confusion among consumers and the acceptance of the concept of independent funding for the consumer representative body to avoid capture by any industry or sectional interest, or even the suspicion thereof.
Today the General Consumer Council is the principal consumer body for Northern Ireland. Its aim is to promote and safeguard the interests of consumers and to campaign for the best possible standards of service and protection. The General Consumer Council gives consumers a voice and makes sure that the voice is heard by those who make decisions affecting consumers. In addition, it has specific responsibilities in relation to energy, transport and food. It investigates, researches and publishes reports; it seeks to influence both the public and private sectors and campaigns for a fair deal. But perhaps its strongest feature is its high public profile in Northern Ireland. Consumers recognise it as the body that looks after their interests.
The reasons for having a unified general organisation are pronounced. It is strongly held that the dilution of effort either increases the cost or results in ineffectual consumer attachment. Those points emphasise that it is widely accepted in the Province that we need to avoid a plethora of bodies; a rag-bag of structures which can be costly, ineffective and easily confuse the public and erode confidence. I underscore that point by reference to some of the remarks made by the noble Lord, Lord Ezra, in regard to regional and local bodies which bear upon specific arrangements.
The council is comprised of 12 members, including the chairman, representative of Northern Ireland's citizens and appointed by the Northern Ireland Office. It has a staff of eight full-time and three part-time members. Its budget for 1994-95 was £420,000, which was met by a grant from the Department of Economic Development. I hold that by any standards that is good value for money with the results achieved.
In that respect, the noble Baroness, Lady Wilcox, will be aware that the Northern Ireland General Consumer Council works closely with her national body and will therefore already know the details of the background that I am giving. The reason I felt it necessary to give that background at local and regional level is that it is evident that there is an urgent need at United Kingdom level to identify the growing gaps in consumer protection law and enforcement. The DTI consultative document glaringly presents those gaps in its text and the flow charts. The four main laws governing competition in the United Kingdom are policed by four different authorities all with overlapping roles and leading to inconsistency, loss of valuable time and resources.
It appears to me that a fair and forceful case can be and indeed has been made by a number of noble Lords today, for the establishment of a United Kingdom consumer affairs authority with suitable, regionally-based organisations along the lines of the Northern Ireland General Consumer Council. That point again was reinforced by the noble Lord, Lord Ezra. The United Kingdom consumer affairs authority should have powers to deal adequately with competition policy and regulation. It should also represent consumer interests and commission consumer research. I shall be pleased to hear the Minister's reaction to that suggestion.
Baroness Seear: My Lords, it is--or should be--the mark of any democratic government that they are not in the pocket or, to put it less bluntly, unduly influenced by any specific lobby or sectional interest group. It is a constant battle among democrats to see that that does not happen. It is a point which has tied many of us to these particular Benches--but that is for another day.
The lobbies are one of the great problems of today, even though they are important. It is important that lobbies and individual sectional interests should be properly represented. There is considerable danger that lobbies have too much influence and are able to sway government far more than is appropriate. I would like to say more about that on some other occasion because I believe it is a central issue in getting the right government in this country.
We have talked almost exclusively about regulations, but those are for the benefit of the consumers who are the real subject of the debate today. Consumers have lobbies themselves: they can be regarded as, and in some contexts are, lobbies for particular interests. There is a great difference between the consumer lobby and others because all of us are consumers, and we would be in a very poor state if we were not. Therefore, one can distinguish the consumer lobby from any of the others. It is appropriate that the consumer's voice should be heard and heard very clearly.
How are consumers best protected? There can be no doubt that competition is the way in which they ultimately get the best deal. That is why we have always been in favour of free trade. Protection has always been put up in furtherance of the objectives of particular interest groups rather than in the interests of consumers as a whole. Genuine competition is far and away the best protection for the consumer.
The consumer has to be protected in a market economy. We have to remind ourselves that this is where regulation comes in. We have to remind ourselves also that the market is not a jungle. The laws of the jungle are that everyone grabs what they can for themselves and runs for it. All markets, from medieval times onwards, have had a degree of control and regulation. So there is nothing incompatible about arguing for some degree of regulation while at the same time arguing the importance of the free market as being the best protection for the consumer.
But what do we have in this country by way of regulatory machinery to protect competition in the interests of the consumer? As everybody knows, we have two organisations; namely, the Office of Fair Trading and the Monopolies and Mergers Commission. Surely, one of the results of today's debate should be to look again at the case for not having two organisations, especially if they do not both work with the degree of competence and efficiency that is desired. There is a considerable amount of criticism about the way in which the Monopolies and Mergers Commission is working. A very strong article in the Economist recently drew attention to the way in which cases of unfair competition had been put to the MMC concerning industries as wide apart as instant coffee and, if I recall rightly, cars. Those cases had been turned down as not having any validity by the Monopolies and Mergers Commission. I have not read the cases, but it seems surprising that in a considerable list of cases given in the article the judgment of the Monopolies and Mergers Commission should go unchallenged. It is interesting that the CBI in today's press, I believe, has come out in favour not of the amalgamation of the two but of a change of a very drastic kind. It suggests giving the detailed investigation to the Office of Fair Trading with the commission hearing further appeals, as it were, if decisions are not totally acceptable.
One of the matters we should look at and should now be pressing is the division between the Office of Fair Trading and the Monopolies and Mergers Commission. It is strange that so many people in the commission are part-timers. How do we know that these people are able to give the time and attention necessary for an organisation as important as that and the development of competition in the interests of the consumer?
The Government say they are in favour of competition. The party has been converted to competition over the years. To be fair to this Government, they have always expressed approval of the idea of competition and free trade. That is a welcome conversion from the history of that party. But how well have the Government served the consumer? I wish to look at an example at how ill the consumer has been served in the recent debates, discussions and
I gather that a study has been undertaken in Birmingham concerning over 300 retailers. Despite the fact that there has been inspection by the Government's meat hygiene service there are still appearing in the shops items of food which should have been banned but which nonetheless have been passed by the Government's agency. What are the Government doing to keep consumers properly informed? A plea has been made that there should be far more information given to the consumer. The Government say there is nothing to be afraid of; but people are very afraid. At least the consumer should be able to discover from labels whether articles contain beef. There is no such information available at present. The Government should be concerned about the consumer as well as the farmer. I am not against the Government being concerned about farmers because they are very important people but they are only there to produce the food that the consumers want to eat. If the consumers do not receive protection as regards food, there is a very serious gap indeed.
There is another fatal flaw in the organisation in this country which deals with these matters. I have urged a merger between the Office of Fair Trading and the Monopolies and Mergers Commission, or at least some radical change. It is an extraordinary arrangement that one government department looks after both agriculture and food. In the past many people have urged a separation of responsibilities, one department looking after the interests of agriculture and another concerned with the consumer. I wonder whether the noble Baroness has heard what I am saying because this is a very important suggestion. It has been put forward by other people, but I want to bring it to the fore. It has not been mentioned previously in today's debate.
To have food and agriculture controlled by one department in government brings a conflict of interest, which cannot be in the best interests of the consumer. This matter has been pressed before and I press it again today because this is the debate in which it should be stressed. There should be a separation of responsibilities. The department looking after consumers' interests in food should not be housed alongside the agricultural interests, which dominate the whole time, within MAFF.
Lord Peston: My Lords, we have had a particularly interesting debate, introduced so ably by my noble friend Lord Borrie. It has covered a large number of topics, most of which I shall have to leave on one side because of the lack of time. My heart goes out to the Minister in having to deal with several topics which I had no idea were likely to arise today.
As regards competition policy in particular, much has been said with which I agree. Again, I shall be unable to say anything on that because of the lack of time. Perhaps I may add that we do boast about how excellent your Lordships' House is in debating fundamental matters. In that connection I believe that the Government should find time for a debate on their recent Green Paper on competition policy. It would be a pity to let that go. What I would most like to do in that regard is to pursue in detail the type of important points raised by the noble Lord, Lord Kingsland. Therefore, I hope that noble Lords will forgive me if I do not go into those matters today.
I intend to speak on the subject which I thought the debate was about; namely, regulation. Even in talking about regulation and the regulators, I shall leave on one side financial regulation which is an enormous topic for which there is no room today. Financial regulation is in a terrible mess, but perhaps we could debate that on another occasion.
I am talking about a relatively new form of statutory regulation. We should bear in mind that so-called "self-regulation" has a statutory basis. It derives from the privatisation of the former nationalised industries and the need to regulate them in some form or another because most of them had immense monopoly power. That was the beginning and the end of it. I should say immediately that although we started off with the nationalised industries, during the past few years several new companies have emerged, operating in the very same economic areas. In addition, some of the original privatised enterprises have been purchased--or it is proposed that they will be purchased--by conglomerates. That too changes their economic position but, much more importantly, it complicates the position of the regulator. We have talked about the emergence of competition. Again, that changes the role of the regulator although that is not necessarily to say that we do not need regulators any more.
We have all said that we are concerned with the consumer first and foremost. I stand second to no one in supporting Adam Smith's dictum that consumption is the sole end of production. The whole point of production is consumption. However, having paid tribute to the greatest of all economists, I always add that if you do not produce anything, you cannot consume anything. It is worth bearing that in mind when looking at the way in which the economy works.
Having said that and having looked at the privatised industries, one of the tasks before us which has not yet been mentioned is to try to discover new ways of promoting competition. What has happened in the gas industry is a good example and I am glad that my noble friend Lord Borrie raised it, particularly as it looks as if the experiments to which those of us who dealt with the Gas Act were looking forward have got off to a bad start. I hope that that can be put right in the fairly near future.
To echo the noble Lord, Lord Ezra, I am totally puzzled by the extraordinary mess in the electricity supply industry. It seems that the only person who thinks that everything is clear is the Minister who
It is worth bearing in mind that the regulators were mostly new to the task. They had little knowledge or experience of regulation per se and, for the most part, they were not experts in the industries that they sought to regulate. For them and their staff, regulation has been a learning process which is by no means at an end. I hope that I am not being more acerbic than usual when I suggest that although some of the regulators have performed reasonably well, a few are hopeless and seem to have learnt nothing from their high-salaried jobs. Perhaps I may add in that regard that it seems that in more than one case the interests of the shareholders have too easily overridden the interests of the customers.
We are aware of the classic problem to which my noble friend Lord Borrie referred in another context. The Americans, experts in this area, are certainly aware of it. I refer to the asymmetry between the information that is known to the regulated enterprise and the information that is available to the regulator. I wonder whether too much is hidden under the cloak of commercial confidentiality. I also wonder whether the regulatory offices have sufficient expertise fully to protect consumer interests. Viewing regulation as a game of strategy--that is surely how it should be viewed--leads me to suggest that the rules are too heavily biased against the regulator and therefore against the consumer.
The role of the regulator is to bring us, in practice, closer to the outcome that would emerge from a correctly operating and competitive market if that were possible to achieve. The point that I make--I have made it before--is that in competitive markets profits are not guaranteed; nor is survival. That is the very essence of the market mechanism: you win some, you lose some. It follows that it is not the task of the regulator to guarantee profits or to create a cosy life for managers and shareholders. However, in my view that is precisely what the regulators have done. We have to find a way of ensuring that that does not continue to be the case in the future.
On the other hand, I am not seeking to say that the regulator should behave arbitrarily or that he should be able to add regulatory risk to the other risks that any business has to face. I argued that point when we considered the Gas Act. In the modern world, firms have enough problems without having to cope also with irrational regulation. Therefore, regulation must be rule-based and it must be transparent. However, we must recognise at the same time that in a changing economic environment, the process of regulation will have to adapt. What is not desirable--I state this strongly--is the ad hoc case-by-case approach, so beloved of the Monopolies and Mergers Commission, which is probably our most disastrous area of government at the moment--
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