Clause 56 - Specified considerations

Enterprise Bill – in a Public Bill Committee am 6:15 pm ar 30 Ebrill 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire 6:30, 30 Ebrill 2002

Some of the matters that we have discussed are relevant here, but I do not want to go over them again. Having examined the cart in detail, we come to the horse. The question is to which areas the decision-making attributes should be applied. I have established something that I had not previously fully understood—the Secretary of State is proposing a special decision-making procedure, to be applied to national security in the first instance. Under that procedure, if the Secretary of State believes that there is a national security consideration, she can issue an intervention notice, enabling that consideration to be taken into account alongside the competition grounds.

The Office of Fair Trading may declare that there are no competition grounds and may even advise that no reference to the Competition Commission be made on the public interest grounds raised in the intervention notice. However, the Secretary of State can go ahead with the reference and can also, as I understand it, contradict a report from the Competition Commission that states that there are no competition grounds and no adverse effect on the public interest. The Secretary of State can maintain that there is such an effect and that there must therefore be a remedy. As far as I can see from the rest of the Bill, she can seek her own remedy rather than being constrained to follow any remedy set out by the Competition Commission.

We are contemplating a merger regime quite different from the provisions under the Fair Trading Act, which this Bill is designed to replace. Under those provisions, if the Secretary of State thought that there was a public interest, he or she could force a reference to be made even if the OFT advised against it, but was constrained by the decision of the Monopolies and Mergers Commission. If the MMC found that there was no adverse public interest, that was the end of the matter.

The new regime is quite different. Perhaps I am particularly slow, but I had thought that the Secretary of State was simply proposing to leave the public interest criterion in relation to national security in the legislation, so that it would apply in much the same way—that she was merely proposing not to narrow the test to competition.

However, we are dealing with a different approach to the public interest. It may well be appropriate to apply this different test to national security, because the Secretary of State may well take a different view from the Office of Fair Trading and be right to do so. As my hon. Friend the Member for Huntingdon said, the various economically or business-trained members of the Competition Commission may not appreciate considerations of national security to the extent that Ministers have to.

Ministers have ultimate responsibility for national security, so they may well entirely substitute their view for that of the competition authorities, but in terms of any national interest other than that of national security it becomes difficult to justify the Secretary of State's reserve power to intervene and to cause the matter to be investigated by the Competition

Commission. However, the measures go much further. The Bill proposes a power that would allow the Secretary of State not only to cause a reference to be made and an investigation to be undertaken into such a merger, but to substitute his or her view of the public-interest aspects of that investigation for that of the Competition Commission.

We debated an amendment that would have limited the Secretary of State's ability to impose his or her views. In this debate we should recognise that if the Minister is saying that she and her colleagues would not contemplate adding to the power in section 56, it is probably incumbent upon them to contemplate not giving themselves the power to go beyond national security, or, as it is defined in the EC merger regulations, public security. It is an excessive power in relation to any factor other than national security.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

What worries the hon. Member for South Cambridgeshire because it is a faint possibility worries me because it does not clearly specify that the public interest should be considered. I pursued the public interest argument when we debated amendments Nos. 126 and 129 in our seventh sitting. That is why I did not move amendment No. 262, which was tabled in my name. It would have applied the public interest consideration to the Secretary of State, whereas the previous amendment would have applied it to the OFT. Both of those are especially important given the points made by my hon. Friend the Under-Secretary on clause 43. I shall follow that argument very carefully, but that is why I felt that I should not move my amendment at that particular time. Nevertheless, I still have a great deal of interest in the public interest.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

My hon. Friend the Member for South Cambridgeshire has elegantly rehearsed the argument about extending the public interest exception beyond national security. As I said when we debated an amendment at some length—I do not want to repeat those arguments—we are far from satisfied. The Under-Secretary is saying that no one in her Department can conceive of any circumstances, not matter how hypothetical, in which that power might be extended, but at the same time she is utterly determined to keep it in the Bill. That is a major concern, not least because it calls for a wholly different regime and philosophy from that in the rest of this part of the legislation, which is something that the Library brief helpfully makes clear. Again, we have made the point, which bears brief repetition, that if we are all in favour of keeping ministerial involvement to a minimum, the exception has to be extremely narrow.

I do not want to rehearse the arguments deployed by my hon. Friend and I want to focus on what is in the Bill as opposed to what might be in clause 56, or other clauses, at some time in the future. We are told that the concept of national security is based either partly or wholly—again, I should like that to be clarified—on the phrase ''public security'', which, once again, crops up in the EC merger regulations. I would be grateful if the Minister would give us some guidance on how that phrase is defined.

We have all advanced the debate on the basis, which is almost an assumption, that national security

is a defence matter. The hon. Member for Hemel Hempstead (Mr. McWalter) gave the example of defence equipment contracts, but national security could also involve terrorism.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

My hon. Friend's mention of superguns is a helpful reminder of an episode that is not long past. We know, because we have been told, that people such as al-Qaeda have—rather like Al Capone in the 1920s—moved sharply into legitimate business in all sorts of ways, which include buying ships and no doubt buying some of the things that go into those ships, such as terrorist materials. International terrorism is another national security consideration.

The mainstream concern about which we all assume that we are talking is defence, which concerns this country's ability to continue to make equipment for our armed forces and to have access to such equipment to provide for our national defence. That opens up the question, which my hon. Friend the Member for South Cambridgeshire has raised more than once in Committee, of how we approach foreign companies. We are looking at preventing state defence secrets from being exported from these shores through mergers.

Those are the narrow concerns. The production of equipment used by the intelligence community is another possible area of concern. I would hope that the Under-Secretary and those who advise her have a series of categories, examples or merely rough scenarios that they have thought through in that context. I would like to press the Under-Secretary. Is the process any more elastic than I have suggested, or is it as I have described? Does public security mean something subtly different from what the clause describes as national security?

I can only endorse what my hon. Friend the Member for South Cambridgeshire has said and emphasise the tremendous concern in my party not just about the lack of certainty for business—I have gone into that before—but the sheer matter of principle that a narrow and important exception should become so elastic, in what can be added by subsequent Secretaries of State, when no one could envisage any circumstances in which that might happen.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Members of different parties have different desires in relation to such matters, but the Government are clear about why they are pursuing their line. I have reassured Opposition Members when debating earlier clauses that we have no intention of adding anything. We have attempted to make sure that the unforeseen can be dealt with because it is, indeed, unforeseeable. Opposition Members want to envisage something unforeseen, but cannot. The unforeseeable often comes around the corner to surprise hon. Members and Ministers.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

I acknowledge that it is difficult to deal with matters that are purely theoretical. However, let me put it to the Under-Secretary that I was pointing out—it would be helpful if she would respond—that if national security is in a category of its own, the

provision should apply to national security. At the risk of making a complex Bill even more complex, does she accept that any consideration of public interest that does not concern national security should be dealt with not in this way, but in a way akin to the former merger reference procedure under the Fair Trading Act? In that instance, the Secretary of State could not make decisions about what is in the public interest according to her subjective criteria, but only by reference to the decisions of the Competition Commission.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman makes a number of assumptions. His suggestion that we have two separate regimes would complicate the matter, particularly because neither he nor I could foresee whether any matter that was subject to provisions in this and related clauses was closer to national security than the other matters to which he suggests it should be likened under the normal procedures. We cannot speculate because we do not know.

The Competition Commission's competition expertise will be used in all cases. The Secretary of State is an appropriate person to have a final decision on the public interest test because it is the Secretary of State who is responsible for wider matters of public interest and has wider accountability through Parliament.

In relation to the interesting discussion about the definition of national security, it is important that the Secretary of State can intervene where necessary to protect national security. I think that all hon. Members would agree. I do not think that national security should be so tightly defined as to be considered on a case-by-case basis. National security primarily concerns defence issues. It includes public security, but only matters of great importance to the state. As the hon. Member for Eastbourne said earlier, national security is like an elephant: one knows it when one sees it.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

On this occasion, I am afraid that the Under-Secretary is not even close to a good argument. If it is national security, it will be specified in clause 56. If it is not national security, it will have to be separately specified. We are discussing a hypothetical situation—one that the Under-Secretary must envisage, although she cannot say what form it might take—in which public interest considerations that are not national security considerations might give rise to the Secretary of State wishing to amend section 56.

The Under-Secretary has not given me a good reply. The Bill should be amended so that, although circumstances may give rise to the Secretary of State's concern such that she would issue an intervention notice and amend section 56—she might even override any recommendation from the Office of Fair Trading and cause a reference to be made to the Competition Commission—the other public interest criteria should be determined by reference to the advice of the Competition Commission, as is the case in the Fair Trading Act now.

I am afraid that the moment that the Under-Secretary talks about the final arbiter of public interest, she is indicating that many years ago we

should have amended the Fair Trading Act so that the Secretary of State could override the Monopolies and Mergers Commission reports when they were received. Even if the MMC said that a merger was not against the public interest, the Secretary of State could have simply overridden it. That would have moved merger policy in this country in the opposite direction to the one that the Government profess to believe to be right.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead 6:45, 30 Ebrill 2002

Surely the hon. Gentleman would agree that there may be major civil emergencies of various sorts. Certain activities may threaten the purity of the water supply or the air or possibly heavily contaminate the biosphere. Potentially, several situations could be as alarming for a Government as, say, a threat by enemy action. For instance, a merger might create a rather irresponsible company that the Government might view as a threat. Does the hon. Gentleman accept that such a case would have to be included in the parameters of the Bill?

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

No, I do not think that I do accept that. I do not have the definition in front of me, but I suspect that the public security definition under the EC merger regulations is wide enough to deal with major threats such as water supply contamination and so on. If it is not, and if the Secretary of State wishes to amend the measure to give that as a cause for an intervention notice, I see no reason why on such grounds the Competition Commission is not competent to advise her—in effect, to make a decision for her. I fail to see why the Secretary of State should be able to override it.

The classic case from the past is the series of references made by the then Secretary of State under the Lilley doctrine, to which I referred earlier, in relation to foreign ownership. If I recall correctly, four references were made against the advice of the Office of Fair Trading. In almost all of those cases, the MMC did not uphold the reference but found that there was no adverse public interest. In effect, the then Secretary of State and the subsequent one were deflected from that part of the policy.

That may or may not be right; I shall not debate the merits of it. The point is that the Secretary of State believed one thing, but the MMC believed another on the basis of what was regarded in the wider marketplace as more objective grounds. Let us accept that national security occupies a sui generis position and that the Government cannot delegate responsibility for its maintenance. However, it is perfectly reasonable for Ministers to delegate what is not national security to the Competition Commission in just the same way as they have delegated the responsibility to reach a conclusion about such matters to the Monopolies and Mergers Commission.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

There is not much more that I can add to help the hon. Gentleman. I do not think that where we want to go and why we want to go there are very different in essence from what he is arguing for. The only area of dispute between us concerns what happens if something unforeseen crops up. He would

like there to be no provision for any unforeseeable circumstances, but I say that there is a need to ensure that unforeseen circumstances can be dealt with.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

To—I think—correct the Under-Secretary, I am not saying that there should not be provision for unforeseen circumstances. What I am saying is that, if the Under-Secretary wants to provide for unforeseen circumstances, she should do so through the mechanism of a reference to the Competition Commission, and allow the Commission's decision on whether something operates against the public interest to be the determining decision.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

There is clearly a difference between the Competition Commission, whose role relates to competition matters, and those best placed to judge public interest. The Secretary of State and this House, with its accountability role, are in a better position to judge those issues than the Competition Commission, whose expertise lies in the competition field.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

The Under-Secretary is now trying to set on its head the whole basis upon which she is bringing this section of the Bill before us. Ministers have determined in the past that the MMC can make decisions based on public interest criteria—not only competition matters, but public interest grounds have been presented to the MMC. Ministers said, consistently over time, that they felt that the MMC took decisions that were objective and more predictable in the marketplace, and that they wanted to go down the path of increasing such independence. It follows logically from that that if unforeseen circumstances give rise to public interest grounds for a reference, the Competition Commission, like the MMC, is a perfectly acceptable vehicle for determining them.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman and I will have to agree to differ on that point. I am listening to him carefully, but I do not believe that he is making a case for doing anything other than what we are doing. He is failing to tackle the question of how exactly, under the arrangements, he would deal with things that might be akin to national security but not be national security. He cannot say whether something that crops up that neither he nor I can foresee will be more akin to that and therefore ought to be dealt with by the route set out here rather than the route that he is advocating of simply going through the Competition Commission.

Question put and agreed to.

Clause 56 ordered to stand part of the Bill.