HC Deb 18 March 1988 vol 129 cc1328-83 9.36 am
Mr. Michael Fallon (Darlington)

I beg to move, That this House recognises the part which competition policy plays in fostering choice, reducing prices and stimulating wealth creation. I welcome the opportunity for a debate on competition policy. Straight away, I welcome the interest shown by my hon. Friends and especially by my hon. Friend the Under-Secretary of State for Corporate Affairs. I thank him not only for attending this debate, but also for ensuring that it is supplied with a plethora of documents. We not only have before us the White Paper; he has also managed to rush out documents on mergers policy and on restrictive trade practices in good time for our debate.

Those documents underline the Government's commitment to competition policy. That commitment was enshrined at the beginning of our period of office in the Competition Act 1980. I am especially glad to see that commitment flagged up in the lights as the first objective of our new, bold Department of Trade and Industry. That Department has said: We seek to produce a more competitive market by encouraging competition and tackling restrictive practices, cartels and monopolies. Today we shall consider that pledge and measure the performance of my hon. Friend the Minister against it. We shall do so because competition is a national interest as well as being in the national interest. Competition provides choice, reduces prices, raises standards, stimulates wealth creation and enterprise, and therefore, fundamentally, creates jobs.

In nearly nine years of Conservative Government, we have made considerable progress towards a more competitive economy. A whole raft of controls on prices, dividends, income and exchange of capital have been swept away. The DTI has been transformed from being the home of subsidy and sponsorship into its new role of stimulating enterprise and innovation. I especially welcome the White Paper's emphasis on the importance of open markets. The right to compete and the right of the consumer to benefit from that competition depend, in the last resort, on markets that are open to all customers and all practitioners, be they business men, traders or members of professions.

Let us consider whether markets are sufficiently open to the consumer. Is there really enough competition and choice for the customer in our daily lives? When I leave the House this afternoon, I shall drive north up the A1. The Consumers Association has told me that it has classified 28 places between London and Scotch Corner as family roadside restaurants. Of those, 16 are Little Chefs and eight are Happy Eaters. You may not be aware, Mr. Speaker, that both Little Chefs and Happy Eaters are owned by Trusthouse Forte. A single company owns and operates 24 of the 28 roadside restaurants available to a family driving north between London and Scotch Corner. I exclude pubs and hotels from that analysis. Is that really a sufficiently competitive framework? Is there enough choice and variety in price and quality for the consumer?

There are other examples. Increasingly, our high streets are dominated by four or five large conglomerates. British Shoe Corporation Holdings plc operates nine different footwear chains and controls 25 per cent. of the market. How many people realise that Woolworth, Comet, B and Q and Superdrug are all the same company? How many people are aware that Dixons and Currys, which theoretically compete against each other in the electrical goods market, are in fact the same company?

Some three quarters of our public houses are not free; they are tied. Half of them are operated by just five brewers. The January edition of Which? found that the average price of lager in the public houses operated by the big five brewers varied by only 5p. The brewers control access of new entrants to the market place and they largely dominate the financing of those enterprises. There was an inquiry into that monopoly by the Monopolies and Mergers Commission more than 20 years ago, and another is being conducted at the moment.

Another example of this practice involves domestic expenditure on books. There is still a form of retail price maintenance in the form of a net book agreement which holds up prices and makes it more difficult for smaller bookshops to enter the bookselling business and to discount where they consider that to be in their interests. I have no doubt that, without the net book agreement, book prices would not be as high as they are. However, publishers will tell us, as they told the Financial Times a couple of weeks ago, that the net book agreement promotes an orderly and healthy trade. The publishers would say that. However, they must tell us why book buying is one of the only items of consumer expenditure that has been relatively static throughout the 1980s, when every other item of consumer spending has increased in volume. A whole range of articles and consumer goods and services must be examined.

The growth of concentration in our high streets and the so-called march of the multiple stores may not be adverse developments. Over a period, the effects may be self-correcting. There will always be a place for the smaller store and the independent retailer who may take advantage of public disillusionment with the larger chain. Today I will try to argue that the growth in concentration in our high streets requires constant vigilance and effective machinery to control abuse. That illustrates the need for independent and objective agencies such as the Office of Fair Trading and the Monopolies Commission.

Is our machinery sufficiently effective? Are the Government doing enough in these areas where they have influence on the market-place? I first want to consider the effectiveness of the machinery. Does it take too long for potentially adverse, anti-competitive behaviour to be investigated? Are the inquiries undertaken by our independent agencies sufficiently specific or regular? Is it right to consider the brewers once every 20 years, given the huge changes that have taken place in that market? Are the powers available used fully? I hope that my hon. Friend the Under-Secretary of State for Corporate Affairs will answer some specific questions.

As I understand it, the Monopolies and Mergers Commission has powers to order divestment in areas where it believes that there is too much concentration. I do not recall those powers ever being used. Will my hon. Friend the Minister confirm that those powers still exist, and tell us whether they should be used more effectively?

We welcome the proposals in the Government's mergers document to speed up the various inquiries procedures and introduce a new system of voluntary pre-notification. That practice, which must be sensible, is quite common in many of our western industrial competitors.

The other key issue in the Government's mergers document relates to issues of public interest other than competition which our agencies should take into account. The paragraphs in the document covering those points deserve careful scrutiny by the House. Those issues are listed in chapter 2 as the effect on local employment, the effect on regional development, the level of research and development spent in a particular industrial sector, and the desirability or otherwise of foreign takeover.

Although those effects are listed, and although one of those effects may be adverse when it is considered, that does not necessarily mean that the decision is not best left to the market. As the White Paper explains, the effects may be purely localised and temporary. Even if a decision is not best left to the market, it does not follow that politicians are any better than the markets at assessing the full implications of those local, regional, research and development and international effects. I especially welcome the declaration in the mergers document that the Government are likely to intervene only in very exceptional cases.

I believe that the Government should have given two further commitments. They should have spelt out more clearly that, where they accept a role in mergers policy, they must take full responsibility for that. We cannot leave our independent agencies such as the OFT and the MMC to second-guess the public, political or national interest. It must be right that the independent agencies should keep rigidly and rigorously to the definition of competition that they are enjoined to explore and leave it to Ministers, where they wish to interfere, override or overrule, to justify that interference in the very exceptional cases by explaining to the House and to the public why they are interfering.

With regard to foreign takeovers, I would have liked to see a clearer statement of the Government's commitment to an open trading system. We must be in no doubt that if we continue, as we have done in recent years, to invent reasons why foreign companies cannot take over British ones, sooner or later other countries will invent reasons why our companies cannot take over or take a share in theirs. The freedom of companies from overseas to take an interest in companies here is the freedom to invest in our country and it is reciprocated by the freedom of our companies to invest abroad. The open trading system is premised on that.

Let us examine to what extent markets are already partitioned by Governments. I have already spoken about whether markets are sufficiently open to consumers and about what the Government can do to ensure that access is as open as possible. What about the Government's direct or indirect sponsorship of so many restrictive practices, cartelised agreements and trading arrangements? A number of things in consumer life appear to be restricted — for example, credit cards. An inquiry is under way by the Monopolies and Mergers Commission into whether there is enough competition between Visa and Access, or between the bank cheque cards in which Barclaycard has such a large share. So we come back to the extent to which Government policy favours a semi-cartelised arrangement between our major clearing banks.

Then there is the lack of competition leading to relatively high prices of textiles and clothing — the Government underpin the multi-fibre arrangement negotiated on behalf of the Community. And why cannot a television viewer plan his TV viewing more than a day or so ahead without buying the Radio Times or TV Times, which enjoy a duopoly of publishing schedules? That duopoly in the broadcasting system is operated and enshrined by the Government, but we are planning to liberalise it.

I have already mentioned roadside catering, which relates to Government policy on licensing motorway service areas. It is not surprising that only half a dozen major companies are involved, given that sites remain in the ownership of the Government and can he rented only on 50-year leases.

I must not be too critical. As I said at the beginning, much has been achieved in establishing a more competitive economy by this Government. The privatisation programme has put an end to many former nationalised state monopolies. There is now competition in long-distance coach transport and between British Telecom and Mercury in telecommunications, and we are promised more of the same in the future. If I were not attached to the Department of Energy, I could do a better job of praising that Department's proposals for injecting real competition into electricity generation.

However, we have a considerable way to go. I want to take my hon. Friend the Minister on a tour of some of his neighbouring Departments. The DTI White Paper makes it clear that that Department has a role in promoting competition across all Whitehall Departments. Under my hon. Friend's Department, wages councils mean that small retailers must accept wage levels largely settled by the big multiples in the wages councils negotiating machinery. In the same Department's area of responsibility, the dock labour scheme prevents scheme ports in the north—in areas of high unemployment—from competing on equal terms with non-scheme ports in the south.

The Department of Transport still oversees a whole panoply of price controls and licenses in air transport, which is a ludicrously partitioned market in which the business man must pay high prices for the freedom to travel when he wants, and our constituents, going on holiday to the Mediterranean, must fly on a certain day and return on the same day a fortnight or three weeks later.

Some progress has been made in liberalising the air-fare structures in Europe. One of my favourite competition quotations dates from April 1986, when a British Airways spokesman, was reported "taken aback" when Air France reintroduced meals in tourist class on the London to Paris route. He said: These things are usually discussed bilaterally to prevent one of us labouring under a competitive disadvantage. We have moved on from that. British Airways is now a private company, as is the British Airports Authority. We must not underestimate the achievements of the "nouveau liberalisme" in France and its success in privatisation.

The Ministry of Agriculture, Fisheries and Food still supervises a largely wartime ethos of production controls, marketing boards, levies and quotas, and dictates what the consumer will pay in the shops, while, in the name of Europe, barring our constituents from choosing European produce. Why was it left to the Consumers Association, rather than a Ministry of Food, to fight for five years for our right to choose pasteurised milk or unpasteurised cream from other member states of the Community?

The Department of Health and Social Security still maintains price regulation in pharmaceutical products. I had a letter yesterday from a company in Cornwall that is being taken to the High Court by Richardson Vick, which believes the company should be charging prices 30 per cent. higher for nasal sprays and inhalants Is the purpose of the pharmaceutical price regulation scheme to prevent companies that wish to do so from cutting prices for consumers in the regions?

Finally, and I hope not too painfully, I wish to take my hon. Friend back to his Department to have a look across the wall that still seems to divide trade from industry—there is a case for fusion if ever there was one—and consider what arrangemeents, in the name of free trade, we still maintain against our own consumers. Let us consider, first, the arrangements for textiles and clothing — the multi-fibre arrangement, which was extended yet again in 1986. It was originally called a short-term arrangement when it was introduced in 1961, more than a quarter of a century ago, and it was clearly shown by the Silberston report to have kept prices for consumers higher than they need otherwise have been and to have done little to prevent the restructuring that would inevitably have taken place in that industry.

I want my hon. Friend to examine voluntary export restraints. How many are there? When I examined the sector three or four years ago, there seemed to be at least 10 unofficial agreements, blessed by the Government, but negotiated between importers and exporters to regulate the quantity of imports that the consumer might wish to enjoy. Such agreements, because they regulate the quantity, also regulate the price the consumers end up paying. They have been well described as invisible taxes.

How many voluntary export restraints does my hon. Friend know to be in existence in his Department, and what is being done to remove them? That is vital, because in our enthusiasm for the single European internal market, we must not forget the huge external market in world trade that we are committed to maintain under the general agreement on tariffs and trade. One can fully appreciate the importance of that agreement only when one considers the mess that we are in in the commodities that are outside it. One such area is agriculture, where we have yet even to control the subsidies that we devote to it let alone assess the damage that our system is doing to other agricultures and economies in less prosperous parts of the world.

The Uruguay round deserves a place in this debate and I look forward to my hon. Friend telling me what progress we are making in extending the terms of the general agreement on tariffs and trade to agriculture and services. I look forward to his reaffirmation of the commitment to a free and fair world trading system. It is axiomatic of our commitment to open markets that those markets must be open to all who seek to operate in them on an equal and fair basis. We welcome the steps being taken by the Government against abuse of the markets in the important areas of company law and financial services. The more we are committed to a free and fair market the greater is the obligation on us to police those markets and apply very tough penalties to those who abuse their access to them.

We must ensure that markets are open to all people who wish to play their part in them. That is why we particularly welcome the Green Paper on restricitive practices that was published last week by my hon. Friend. I see that it is the result of yet another review by Mr. Liesner, who seems to have been responsible for more reviews than Tom Lehrer. Nevertheless, we are indebted to Mr. Liesner. Last week an article about the Green Paper appeared in the Sunday Times and I have been deluged by letters from people highlighting the restrictive practices in the professions—letters about such things as a diploma from the Institute of Housing, people unable to get an Equity card or an Association of Cinematograph, Television and Allied Technicians card, and about some of the practices operated in the more well-known professions.

My hon. Friend has taken a bold and tough approach in declaring illegal all these restrictive practices unless their effects can be shown to be in the interests of competition. Of course he could have chosen the even bolder route advocated by Professor Hayek in "Law, Legislation and Liberty", that it might be easier and simpler to allow all restrictive practices to remain lawful, but simply to make them unenforceable in law, thus allowing them to wither away. The list of restrictive practices in annex D of this document is truly remarkable and certainly stunned me. I had no idea that so many restrictive practices still apply. I did not appreciate how many of these agreements relate to our professions.

No doubt restrictive practices in the professions have their defenders; we can see on the two Front Benches the two-counsel rule still operating. We need to be sure that those restrictive practices operate in the public interest. Of course there is a balance to be struck. Nobody facing an operation by a surgeon or seeking a survey for a potential house purchase would want his surgeon or surveyor to be anything other than properly qualified, but there are three important riders to that.

First, we must ensure that those qualifications do not unnecessarily restrict entry to a profession, particularly where entry is in the hands of a monopolistic qualifications body. Acting is not in the list in annex D, but perhaps it should be entered just below barristers. One cannot get an Equity card unless one works in the theatre and a person cannot work in the theatre unless he has an Equity card, and 95 per cent. of all vacancies in the acting profession specify membership of Equity.

Worse than that, the supply of Equity cards remains in the hands of Equity alone, which produces no figures about the extent to which it dishes them out to relatives and friends. That may account for the tired old faces and family retainers that we see on television. It blocks new talent. To appreciate that, one has only to look at the grip help by the ACTT, Equity and the National Union of Journalists on all parts of our television network.

Secondly, we must ensure when we look at restrictive practices in the professions that the qualifications demanded — important, of course, in the case of surgeons and surveyors — are not unnecessarily high. Good examples are some of the professions supplementary to medicine. We are told that in the Health Service there is an acute shortage of people such as chiropodists and occupational therapists. Under the Professions Supplementary to Medicine Act 1960, only state-trained chiropodists can officially work in the Health Service. There is a shortage of them in the Health Service, and there are waiting lists for treatment.

Mr. Doug Hoyle (Warrington, North)

Is the hon. Gentleman seriously suggesting that we should put people's health at risk by taking on people who have taken correspondence courses? Does he not appreciate all the damage that is being done by untrained chiropodists, many of whose patients have to go to hospital to have the damage undone? Is he advocating that kind of thing?

Mr. Fallon

The hon. Gentleman must justify those allegations, but it is a fact that in the private sector the British Chiropody Association has trained many hundreds of fully qualified chiropodists. They are not allowed to treat NHS patients but, of course, many such patients waiting for treatment in the state sector go to them to bypass the waiting lists.

The third important qualification on restrictive practices in the professions is that they should not involve the misuse of public money. Waiting time by solicitors adds to the legal aid bill. The restrictions on numbers of consultancy posts adds to expenditure and difficulties in running an efficient Health Service. There is much to be done about restrictive practices, and I look forward to my hon. Friend moving from his Green Paper and coming forward with legislation so that each of those practices can be tested and justified or scrapped as necessary.

Some of my hon. Friends want to participate in the debate. I hope that I have said enough to show that Conservative Members at least believe competition to be of the utmost importance to our economy. My hon. Friends in the Department of Trade and Industry are right to premise their competition on markets that are open to all consumers and practitioners.

There is no better text on which I can close than that provided by Arthur Shenfield in his Wincott memorial lecture some years ago, when he said: Freedom to compete is the flywheel of the free economy, the very expression of its spirit, and both a cause and a result of its successful operation".

10.9 am

Mr. Malcolm Bruce (Gordon)

I was interested, but not surprised, to see the motion on the Order Paper in the name of the hon. Member for Darlington (Mr. Fallon), but, having listened to him, I am intrigued by the selective nature of the examples that he used. I do not disagree with the thrust of the points that he raised, but I am intrigued by the points that he chose to avoid. As I develop my comments, the reason why he avoided those points will become apparent.

The main concern about competition policy has been the growth in recent years of large conglomerates which seek to dominate sectors of the market. On a number of occasions, that has brought Ministers to the House in circumstances which have been, at the very least, controversial. The Government's proposals for merger policy show a lack of urgency about curbing monopoly and promoting competition policy.

It is well known that before he goes to bed every night, the hon. Member for Darlington peruses the works of Adam Smith. It is perhaps worth paraphrasing Adam Smith, who wrote in an era when large economic concentrations were very rare, if not non-existent and said that, where two or three business men are gathered together, they are probably planning a cartel.

The idea that appears to emanate from the Government is that the markets are, by instinct and definition, free and that it is improper to suggest that the free operation of the market could lead to concentration of power, designed to protect operators in the market from its very effects.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude)

I hesitate to intervene so soon in the hon. Gentleman's speech, but he is entirely wrong. It is precisely because we accept that the free working of open markets can lead to concentrations of economic power that we stated, in our Green Paper on mergers policy, that that is our principal consideration when deciding whether to refer a proposed merger to the Monopolies and Mergers Commission for full investigation.

Of course concentrations of economic power can arise in a free market. That is why we need merger control procedures. The creation of cartels furthers people's interests. That is why there is restrictive trade practice law and why we have embarked on the most radical reform for the past 30 years.

Mr. Bruce

I realise that I am using a cliché when I say to the Minister that fine words butter no parsnips. He may be sincere in his intentions, but the Government's record does not stand up. If he tells us that everything will be different from now on, we will be pleasantly surprised.

Dr. John Reid (Motherwell, North)

Will the hon. Gentleman give way?

Mr. Bruce

I should like to get on, as I have only just started my argument.

The report on mergers policy appears to suggest that the best people to judge whether a merger should take place are the potential investors. Those investors will be interested in supporting a merger that is likely to secure monopoly power which will help to boost profitability. The annex to the document regarding post-merger performance analyses post-merger profitability. We need an analysis of what happens to consumer interest after merger. Such information will be much more revealing about the need to change the Government's thrust.

The Minister will know that those are not simply my views or those of my party. The Financial Times made the valid point that the Government appear to be more concerned with the speed with which references to the MMC are handled than with whether one receives the right answer. The Financial Times said: Speed is important, but the risk is that it will be achieved at the expense of quality in merger decision making. After all, quality is important. The article proceeded to question the competence of the MMC and stated: There remains a question mark over this body's reliance on part-time, non-expert members. The article also stated that the merger policy document did not refer to merger policy in the context of the European Community. The Community will be a single market within only four years. That point should have been taken into account when considering the British Airways takeover of British Caledonian.

Despite the fine words of the Minister and hon. Member for Darlington, the Government's record to date on competition policy is woefully inadequate. The Government have presided over a greater expansion of monopoly power than any Government in history.

The conspicuous omissions from the speech of the hon. Member for Darlington relate to the Government's privatisation policy. The Government have driven a coach and horses through any credible competition policy. British Telecom was privatised as a single monopoly unit. The idea that one sets up a regulator who manages a second competitor at his discretion is hardly the essence of free-working competitive markets.

Both the hon. Gentleman and the Government know that, and it helps to explain why the volume of complaints about British Telecom has increased in almost exact proportion to its profits. It is disgraceful that the management and efficiency of the operation have not substantially changed. Profitability has increased, but service has deteriorated and competition does not thrive.

Mr. John Marshall (Hendon, South)


Mr. Bruce

The situation in this country is quite different from the situation in the United States, which I do not necessarily praise, but with which the Government draw a parallel, where there is real competition, diversity and choice. There is a real market in telecommunications, although not a perfect one.

Mr. Marshall

Does the hon. Gentleman agree that there is some competition between British Telecom and Mercury? Does he further agree that a nationalised Cable and Wireless would never have been licensed to compete with a nationalised British Telecom? Does he agree that competition is a function of privatisation and would never have occurred without it?

Mr. Bruce

I do not accept that that is definitively true. I accept that that is how competition has functioned under the present Government, but, if we analyse the share of the market and the choice available to people in most services, we see that that competition adds up to only a small duopoly and exists only in certain areas and sectors. It is a long way short of the kind of competition described by the hon. Member for Darlington.

British Telecom is perhaps the worst example, but those of us who worked on the Gas Bill and have followed the operation of British Gas since then notice that there is a monopoly of gas supply in the United Kingdom. Nothing has changed, although British Gas has been referred to the MMC, which we hope might ultimately reveal the extent to which it is using restrictive practices, by, for example, charging a 25 per cent. premium for gas to be used for combined heat and power. That is a constraint on the market and works against the efficiency and competitiveness of British industry and against the common sense of a balanced energy policy and efficient use of energy resources.

We now await the privatisation of electricity. The Secretary of State for Energy says that there will be a free market for coal-fired electricity, but a fixed market for other forms of electricity, notably nuclear power. That is a total manipulation of the market, rather than allowing genuine free choice and competition between different forms of supply. We are talking not about small corner-shop operations but about the massive components of the national economy, where the Government's competition policy has failed abysmally. Their policy may sound wonderful in theory, but it is distasteful in practice.

That brings me to the recent debacle which continues to rumble on—the British Airways takeover of British Caledonian. That raises a number of important questions. One wonders how the Government could concede that the takeover of Britain's second largest airline by Britain's largest airline was not anti-competitive. It was anti-competitive. A real mistake was made, and I regret the fact that at the time I did not oppose it forcefully. When the original privatisation of British Airways took place, routes should have been redistributed much more equally so as to give British Caledonian the opportunity to survive as an independent, second-force airline. Instead, there was the debacle of last year that led to its weakened position and to the takeover by British Airways.

When the takeover was referred as an agreed bid to the Monopolies and Mergers Commission, the MMC chose to negotiate with British Airways a quite different hid from the one that had been agreed with British Caledonian. It was done without consulting British Caledonian, which was shocked and stunned when the MMC report was published, recommending a bid remarkably different from the one that had been agreed at the outset.

Subsequently, British Caledonian took steps to find out whether it could get out of the agreed bid by bringing in alternative interests, notably Scandinavian Airlines Services. Many people feel that that bid could have gone ahead and could have been viable but for the fact that the Government, in their position of power, made it clear that they would oppose and frustrate it to the point where SAS felt obliged to withdraw. We shall never perhaps get to the bottom of it, but it leaves a particularly nasty taste in the mouth, especially since SAS is a European Community airline. It used exactly the same arguments as British Airways used about the need for international co-operation and mergers in order to operate in the international market place.

The final and interesting outcome of all that was that it took the European Community to do the job that the Monopolies and Mergers Commission should have done in the first place. In those circumstances, it is odd that the British Government should allow a mechanism to be applied whereby United Kingdom and European Community consumers have to be protected by an external agency because of the failure of their own mechanism to deal with the problem in the first place. Many of us are therefore entitled to question the Government's real commitment to competition policy.

Another aspect that has to be taken into account is the imbalance that there can be between large corporations and small corporations or companies, of which they are often the main customers. That argument has been rehearsed in this House many times, and I do not wish to dwell on it at length. However, it is well known that large companies exploit their dominance in the market place in a number of ways. They are slow payers to small businesses whose financial resources are weaker. If they wish, they can operate in the market place to see off a competitor.

Mergers are often dominated not by a desire for rationalisation or greater efficiency but by a desire to protect the bidder either from another bid, in order to build themselves up to a size where they canot be bought, or to ensure a strength in the market place which prevents others from entering it and which gives them a more comfortable and a quieter life.

That often happens when a small, regionally based company is being taken over by a natonal or an international conglomerate. There is evidence that companies that are being taken over are often more efficient than the company that is taking them over. They just happen to be smaller. In some cases they are very important to their own community, region or market place. It is regrettable that the Government's review of merger and competition policy does not take adequate account of that fact.

Although it is not directly relevant to this debate, the Pilkington episode is fairly instructive. A company that was rooted in a community in the north-west of England for which it was the town—"St. Helen's is Pilkington and Pilkington is St. Helen's" — was dramatically undervalued by the City of London because it was thought to be a provincially based organisation that did not merit the City's attention.

The outcome was satisfactory because the City of London, when it turned its attention to Pilkington, realised that it was the kind of group that ought to be more fully valued. The consequence was that the takeover bid was withdrawn. However, that episode shows that the motives of the bidder are usually to get something on the cheap, which is against both competition and regional interests.

Mr. Maude

Does the hon. Gentleman accept that in fostering the relationship that there must be between manufacturing companies and financial investors, the onus is on manufacturing companies to ensure a good flow of information so that investors know what is going on in the company? Does the hon. Gentleman accept that, as a result of the bid which was made for Pilkington and the splendid action that it fought in fighting off that bid, Pilkington emerged as a far stronger company? The hon. Gentleman referred to the evidence in one of the annexes to our Green Paper that showed that the performance of post-merger companies has not always lived up to the claims of the bidders. Did he also see the evidence that the threat of a takeover has frequently acted as a terrific spur to improved performance afterwards?

Mr. Bruce

I accept the Minister's points, in particular his first point about Pilkington's need to inform and the way that it reacted. However, I qualify my acceptance by saying that the City could do a great deal more to find out what is going on outside London and the south-east.

I am not arguing that there should be rigidity, which would prevent mergers and takeovers. I acknowledge that there are genuine economies of scale and genuine cases where mergers are desirable. The Government presume, however, that mergers are inherently desirable. The resistance to that presumption is not strong enough. We should be much more critical of the motives that lie behind mergers and takeovers. We should expose the competition issue much more forcefully than has been the case in the past. I fear that we have capitulated too often and too quickly, and that in so doing we have undermined both the regional and the competition interests.

Mr. Hoyle

Is it not true that Pilkington was getting on with the real job of selling glass? It was the world leader in the production of flat glass. It was putting its profits back into research and development so that it could remain a world leader, instead of appealing to the City sharks.

Mr. Bruce

That is a valid and important point. A company that pursues a particular policy can find that it is being raided by a creditor that simply wants to get at its cash or find an opportunity to asset strip. We have to provide a mechanism that will protect companies from such predatory approaches.

The presumption ought to be that while economies of scale can he justified, they are often oversold and over-valued. I repeat that the Government appear to be far too ready to agree that a deal is good because shareholders do well out of it. Of course shareholders will do well out of a concentration of economic power, or from the plundering of a company by another company, which can lead to the distribution of assets. But that is not the point. The Government's job is not to protect shareholders' interests; it is to protect consumers' interests and also regional interests.

The hon. Member for Darlington has wisely concentrated on aspects of competition policy in which he sees imperfections because of his own free-wheeling, free-market approach. Equally wisely, he has ignored the massive concentrations of economic power that have been built up under this Government in ways that have reduced competition and consumer choice. He and I could perhaps make common cause if he were to turn his attention to the Government's failure to ensure that the monopolies that they have privatised are genuinely open to proper transparency of accounts, proper choice and—dare I say it?—to even a great deal more regional strength rather than central, national strength. That would benefit the region that he represents and the region that I represent in a way that has not yet happened.

I take the view that competition policy is important and that the Government ought to wake up to the fact that they do not have a policy that really inspires confidence.

10.29 am
Mr. Michael Grylls (Surrey, North-West)

My hon. Friend the Member for Darlington (Mr. Fallon) has done the House and the country a service in choosing this subject for debate. I cannot remember when it was last debated in the House. Indeed, I cannot remember it being debated in the House at all, which should shame us all, but better late than never. My hon. Friend produced a very good tour d'horizon of the width of competion policy——

Mr. Hoyle

Would it not have been better if the hon. Member for Surrey, North-West (Mr. Grylls) had been present a litle earlier to hear all that his hon. Friend said, rather than part of it?

Mr. Grylls

I have been here for the whole of my hon. Friend's speech, except for a brief moment when I disappeared from the Chamber for reasons that I shall leave entirely to his imagination. I have been present since the beginning of the debate. I would not have missed any of my hon. Friend's speech. That was not a very worthwhile intervention. It was not up to the usual standard of the hon. Member for Warrington, North (Mr. Hoyle), who is normally a very good debater in the House.

In 1983, the European year of small and medium-sized enterprises, a survey was undertaken of the climate in which such firms operated throughout the EEC. The chairman of the judging committee was an American called Mr. Vernon Weaver, formerly head of the American small business administration. I remember that, in his final judgment, he said, "The one thing that you people in Europe need is a really tough competition policy. In my view, you have not got it." During the past year— indeed, the past few months—we have seen a strong competition policy arise in the EEC, through the efforts of Commissioner Peter Sutherland in Brussels and a greater use of articles 85 and 86 of the treaty. We all welcome that.

The proper development of competition policy is an essential part of the working of the free enterprise system, and the capitalist system in general. Without it, the system is like a football match with no rules or referee. We must be careful to avoid overconcentration, which, in my judgment, we have seen in this country over the past 20 or 30 years. Even in the past year, it has begun to be realised that we must not proceed further in that direction.

The Government's initiative in setting up, under the former Secretary of State for Trade and Industry—now the Secretary of State for Transport—the Liesner review of competition policy is greatly to be welcomed. It is a very thorough review, and I have given oral and written evidence to it. Two papers have been produced—a Blue Paper and a Green Paper, although I do not think that there is any great significance in that.

We all feel very passionately that we need to avoid overconcentration, and to re-examine—not, perhaps, in too partisan a way—our policies on how to deal directly with mergers and monopolies. We want as free a market as possible. The hon. Member for Gordon (Mr. Bruce) made an onslaught on shareholders, but they do, after all, own the business. The hon. Gentleman is right to point out that the consumer interest and, from time to time, the national interest are involved, but surely we should remember the people who put their money into the business.

The hon. Member for Gordon may be surprised to learn that I lean to some extent in his direction in being very concerned about the spate of merger mania that has been a facet not only of recent history—although there have been big dramas and criminal proceedings recently—but of industrial life for the past two decades.

It is also essential to the proper working of the free enterprise system that there should be fair play in the market place, with no restrictive practices. As my hon. Friend the Member for Darlington pointed out, it is crucial to preserve access to the market. We talk of unemployment, and say that we desperately need the creation of new firms, new wealth and new jobs. But, if we want that—and we are pleased at the progress that has been made—we must have access to the market. It is no good allowing so much concentration. It is no good allowing anti-competitive practices to go relatively undercontrolled, and then to expect people to risk their money in the market place. Proper access is crucial to maintain innovation and general competitiveness in the enterprise system.

Those who are to the Left of me — and there are many of them—perceive a paradox. They ask, "Why do you intervene? You believe in a free market." We must accept that there is indeed a paradox. There must be a degree of control if we are to have a fair market place in which the free enterprise system can work. A free and fair market is not necessarily a paradox, but if it is I accept it—not that it really matters whether I accept it; it is much more important that all the industrialised countries accept it, along with the need for strong competition polices.

The most successful economies are those of the United States, Germany and Japan. Perhaps, at first, Germany and Japan acted for political reasons, having lost the war, and perhaps having become involved in it at least partly through the overconcentration in their industrial economies. When the war ended, they vowed never to allow that to happen again. It has always fascinated me that General MacArthur broke the industrial empires in Japan. They were too good, he said; they had to be broken down again. Now, those empires have begun to grow, in a huge sea of competitive small and medium-sized businesses. The Japanese are very conscious of the need not to allow overconcentration, and the same applies in West Germany, for similar historical reasons.

We should not worry about that paradox. We should accept it, and work with it.

Mr. Hoyle

Is the hon. Gentleman really saying that Japan is a free competitive society that allows goods to flow in freely, and faces competition from the rest of the world?

Mr. Grylls

No, I am talking about the internal Japanese market. The Japanese have been very determined to maintain a highly competitive market. I am not talking about overseas trade or imports into Japan, which, after all, is a sizeable economy of 120 million people—almost a continental-sized economy in its own right. But, within that economy, there is a determination to maintain competition. Part of the success of the big companies results from their going out and obtaining the most competitive tenders from their subcontractors. That is a fact of Japanese life. I do not wish to become involved in a discussion of whether there is open access to Japanese markets; that is an entirely different subject.

I welcome the Government's Green Paper on restrictive trade practices. It has generally been accepted that the system with which we have lived — the power of the Director General of Fair Trading — has been entirely inadequate. I am not a lawyer. Let us consider what happens in simple non-legalistic terms. Let us suppose that a large firm does something anti-competitive and damages a small firm. The small firm, if it is brave enough, reports it to the director general, who hauls in the large firm—this is a bit of a parody, but it is not far from the truth — wraps it over the knuckles and says, "You are a naughty boy. Do not do it again. You are damaging another company." The large firm promptly goes off and does the same thing again, and, this time, the smaller business might end up being destroyed.

That is not good enough. The powers are inadequate, and I welcome the suggestion in the Green Paper—which I hope will come to fruition—that private actions for exemplary damages should be allowed in such cases, and that class actions should also be allowed. Through such means, we shall hoist the signal that our anti-restrictive practices legislation will have real teeth. I do not wish to get involved in the professions because that is a different argument. However, for business it is crucial that there should be real teeth in our anti-restrictive practice legislation.

In the Green Paper we have moved ourselves much closer, quite rightly and naturally, to the legal position undertaken by the EEC in its competition policy. There was a famous case the other day of a firm in Gloucester, called Engineering and Chemical Supplies, which accused a firm in Belgium, called AKZO, of predatory pricing. The Gloucester firm took the Belgian firm to the Commission. It cost nothing and the firm did not have to pay expensive lawyers or risk breaking up its business because of legal costs. The matter was simply reported to the Commission, which undertook a dawn raid. That may alarm some of my colleagues who do not much like the idea of dawn raids. However, if wrongdoing takes place, sometimes that is the only way of obtaining evidence. The dawn raid on AKZO resulted in it being fined £6.5 million. That is not a rap over the knuckles. It is embarrassing for that firm to have to explain to its board of directors that it has been behaving in an anti-competitive way and that it has suffered a fine of that size.

If we can get some real teeth in our restrictive trade practices, we shall have moved a long way. The Government have been brave in doing that. It has long been a neglected area. As I said earlier, it is essential that that should go hand in glove with the expansion and increase in the enterprise climate.

I want to speak about the merger control policy announced in the Blue Paper. There is a lot of good stuff in it, but it could be strengthened in order to protect the small and medium-sized businesses rather more effectively. The merger control policy set out in the Blue Paper could be improved in four main respects in order to give greater recognition to the rights and interests of the small firm and it is vital that we should do that.

First, under section 84(1) of the Fair Trading Act 1973 the Monopolies and Mergers Commission, in determining the public interest, may consider a series of matters, in addition to competition. That list could be expanded to include other items. It could include the maintenance of a strong small and medium-sized enterprise sector so that that factor has to be taken into consideration. I believe that it was last year when we had the possibility of Plessey being taken over by GEC. That would have been the mega merger of all mega mergers. However, happily, that did not happen. When that merger was proposed the Small Business Bureau commissioned independent research to see the effect that that merger would have had on the independent suppliers to Plessey. The result would have been that about 180 small and medium-sized firms would have been severely damaged or even put out of business.

That sort of research had never been undertaken before. In other words, nobody had ever said, "A wants to join up with B and that may be fine. It may not be damaging to competition, but how would it damage other people?", As my hon. Friend the Minister knows, in the United States that is built into the law. It is one of the considerations—it may not be the overriding consideration—that has to be taken into account.

Alternatively, since the Department of Trade and Industry has said that public interest issues other than competition will be used sparingly in judging mergers, we might perhaps try to articulate the small business element in the assessment of the potential effect of a merger on competition. Perhaps we could stress the need to mention the position of small businesses in, for example, ease of entry to markets, advantages over competitors and the market position of buyers and suppliers in the relevant market.

The other route, which perhaps my hon. Friend the Minister will consider, is slightly new and different for this country. We could perhaps adopt the right of a private action following the United States Clayton Act model. That Act provides for treble damages for private parties, including competitors, suppliers or customers injured in his business or property by reason of anything forbidden in the anti-trust law. it also allows a private party to take out an injunction against threatened loss or damages by violation of the anti-trust laws. I recognise that that would mean moving into a legalistic sphere. However, it offers the possibility of damages being claimed and of people being properly protected through the courts.

Another approach that I ask my hon. Friend the Minister to consider would be to accept the procedure of the proposed merger policy and simply press for a more explicit recognition of the rights of small and medium-sized firms to be considered as third parties. For example, the Blue Paper mentions the clearance of pre-notified proposed mergers. The interests of smaller firms could be considered under that. Secondly, the interests of small firms could be dealt with under the decision by the Secretary of State to impose binding undertakings in lieu of a Monopolies and Mergers Commission reference. Finally, the reference of proposed mergers to the MMC could include a reference to the needs of smaller businesses and any possible threat facing them.

In all three cases the Department of Trade and Industry has accepted the need to notify and consult interested parties, but we could have a more explicit recognition of the interests of small and medium-sized firms built into legislation. It would not be so revolutionary seen against what happens in other countries. In a sense, it would be a big step forward and a recognition of the fact that the wealth and jobs being created today are coming primarily from the independent smaller business sector and the expansion of medium-sized firms rather than from large firms. It would be a recognition of that in an important part of the law.

When we come to legislate under the monopolies and mergers changes in the Blue Paper, I hope that the Government will consider my suggestions in an entirely constructive way so that we can strengthen the working of our merger and monopolies laws, which I believe do not need major overhaul. The small additions mentioned in the Blue Paper and perhaps some of my comments would make things better.

I welcome the Government's dual approach: the changes in mergers policy and the excellent Green Paper on restrictive trade practices. If we bring about the changes, it will, as I said earlier, be the right step forward in obtaining a better competition policy, which is essential to the framework of a proper working of the enterprise culture, which I hope that we all desperately want to see succeed.

10.48 am
Mr. Frank Haynes (Ashfield)

I was born in March 1926. That is a long while ago—62 years. From the day of my birth until now I have always believed that competition is the hallmark of the British people.

I listened carefully to the hon. Member for Darlington (Mr. Fallon), and I should like to take up one point. He said that he would be travelling back to Darlington this afternoon along the A1. He talked about the Little Chefs that he sees while travelling on the A1, and he talked about competition among restaurants. I suggest that he should be careful about competition between road hogs on the A1. That is competition but it is the wrong type of competition. I want to deal with the question of fair and unfair competition.

I can give many examples of competition being the hallmark of the British people. I could mention Doncaster Rovers. You, Mr. Deputy Speaker, will agree that they are a marvellous football team. They are two from the bottom of the third division. With real competition, they will stay in the third division, and not go down to the fourth division. That is competition, the hallmark of the British people and of British football.

Mr. Hoyle

Let us hear about Darlington.

Mr. Haynes

I shall not mention Darlington. I shall mention Nottingham Forest. Brian Clough is a real competitor. He has won everything except the FA cup, and he will win that this year. That is real competition. The Welsh will be on the grass tomorrow to win the triple crown. That is real competition. The British people are good at competition. There is no doubt about that.

Every hon. Member had to compete to get into this place, and the whole nation takes part in that competition. The hon. Member for Darlington was lucky in the ballot. I compliment him on the subject of the debate and. I listened to him very carefully. The British cricket team, who are in New Zealand, have done marvellously over the years. Again, that is competition. When the competition to enter this place is finished, hon. Members have to compete to catch your eye, Mr. Deputy Speaker, to speak.

I shall move on to some of the subjects that we should be discussing in regard to competition that involves the British people. Under this Administration, millions of people have been put out of work. Competition is really getting in the way, because, in many cases, it is unfair. It is unfair in the industry in which I worked for 35 years before I came to the House. I know my onions where the mining industry is concerned. I shall come to that later, as I believe that there is totally unfair competition in that industry.

I do not think that many Conservative Members know what work is all about. They do not know about getting a job to be able to work and contribute to the success of the nation. Free worldwide trade has been mentioned. There are a number of factories in my constituency which produce hosiery and knitwear. Since 1979 that industry has been absolutely clobbered. The Government have allowed cheap imports to drop on our shores at the expense of our industries and have done very little about it.

I shall give the Minister for Trade his due. He has been to Europe and he has tried very hard. He has had some success, but he certainly has not had the success to which the British hosiery and knitwear trade is entitled.

Mergers have been mentioned, and the Minister was drawn to the Dispatch Box on the subject by the criticism from Opposition Members. When we talk about mergers, we are talking about big businesses getting together and creating massive organisations. My constituency has experienced that. It contains little businesses. The Prime Minister preaches at the Dispatch Box about helping small businesses, because that is where the jobs are. Big organisations are trying to move into my constituency. They are big, massive stores and they contribute to Conservative party funds, so I understand what is going on on the other side of the Chamber.

In my constituency the little businesses suffer. A massive company wants to plant one massive food store in my constituency, and there is an application for another, at the expense of the small businesses that have existed for many years. They are family businesses that have been passed from father to son. Now those small businesses that have been built up over many years are being crucified by the Government's merger policies which are creating massive monsters at the expense of ordinary people in the community.

It is all about money. The Government are money mad and they do not think about the living standards of ordinary folk and the importance of having a job in the first place. I had to get that off my chest in regard to big business.

There is more competition in the Department of Health and Social Security, which was mentioned by the hon. Member for Darlington. There is competition by people to get into the offices and get up to the counter to discover whether they will get any benefit because they have no work. That is competition for ordinary folk down on the ground floor. Sometimes people spend the whole morning in that office trying to get the benefit to which they are entitled. That is the unfair competition that I was talking about.

There is also unfair competition in the employment office. I remember when Lord Prior, as the Secretary of State for Employment, announced from the Dispatch Box the closure of employment offices where people could get jobs. He closed down many of those centres, and youngsters leaving school had to travel across my constituency to the employment office that was open. It was expensive for them to get there, unless they walked and wore out their shoe leather. I know what it is like to have holes in my shoes. I know what life and work are about, and I know the difficulties experienced by ordinary families. When I was a kid, my shoes were worn out and cardboard was put in them because we could not afford a new pair. People in poverty will return to those days unless the Government examine some of the policies that they are implementing.

Since 1979, Civil Service Ministers have come to the Dispatch Box bragging about reductions in the numbers of civil servants. But what happens in the community? Those civil servants serve the people. No wonder there are blooming great queues waiting at the counters for their benefit, because there has been a serious reduction in the numbers of civil servants.

I have a particular interest in it. The Government are not helping it. They are allowing the Americans, the Indians and the French to create unfair competition against Britain. So what has happened? We have lost star after star. Britain has produced the finest actors in the world.

Mr. Robert G. Hughes (Harrow, West)

I know that the hon. Gentleman takes a close interest in the film industry. Has he read the press speculation about the effect on the film industry of the welcome tax reductions in the Budget?

Mr. Hoyle

None of those people has said that he wants those cuts anyway.

Mr. Haynes

I understand what my hon. Friend the Member for Warrington, North (Mr. Hoyle) says, but I understand also what the hon. Member for Harrow, West (Mr. Hughes) says. He seems to think that the actors will return in droves. There will be an odd one. I have noticed that Michael Caine has said that he is coming back, but he should never have gone in the first place.

Mr. Malcolm Bruce

He has already come back.

Mr. Haynes

He comes back now and again. Far too many of those people have gone and this has happened for some time. We have lost those marvellous British actors to other countries through unfair competition.

There is another side to the story—the theatre. "The Phantom of the Opera" is showing in New York. It is a tremendous success, with British actors. It is British all the way through from start to finish. That is fair competition. The show is there to be seen by the whole of America. However, because of our Government's policy, there is unfairness towards our film industry.

The hon. Member for Darlington mentioned transport. He nips up and down the A1 in a car. Little does he realise that there are thousands of people in my constituency and others who depend on public services. Because of deregulation of the bus services, people no longer have a bus service. Deregulation has brought in the spivs. Many of those spivs now have to be told to take their buses off the roads because the vehicles are unsafe. The Government have created unfair competition. The result is that some people do not have the service which they used to have and to which they are entitled.

I shall refer to the mining industry but shall not speak for a long time.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Donald Thompson)

Hear, hear.

Mr. Haynes

If the Minister is disappointed, I can extend my comments. Is he encouraging me? The hon. Gentleman obviously likes what he is hearing. He should have a word with No. 10 so that some of these policies are changed in the interests of all the people and not operated just for a certain section.

The hon. Member for Harrow, West mentioned the Budget. It is in the interests of the rich and not those people in poverty in my constituency who have been struggling for a long time and who will struggle even more because of the Government's policies and especially their Budget.

There is no comparison between the mining industry and a factory shop floor. Things can change as the minutes and hours go by. A soft floor or bad roof in the mine can affect production at the coal face. Frequently, production stops. There is another result of the Government's policy of cuts. I remember the day when something went wrong underground and a spare part was needed. These parts used to be kept in the stores on the pit top but, because of the squeeze, the workers now have to go to another pit or to the area base to get them. While this is happening, there is no production at the coal face.

In many years gone by the shaft was used to get the coal out of the pit. There used to be two decks on the chair and three tubs on the bottom and three on the top, with three quarters of a tonne of coal in each. Over the years, we in Nottinghamshire have been the pioneers in the mining industry. We regularly met round the table to talk about how we could make progress here, there and all over the pit. One suggestion was that we should do away with having to load mine cars and should put them on the chair to be sent up the pit to the tippler, who would tip them over and send them back down the pit. The man on the job knows a bit more than the fellow who sits in this place or the fellow who sits in Hobart house or in the area office of British Coal. The bloke on the pit point knows what is needed.

Since MacGregor came, the consultations and negotiations have ended. There is no longer negotiation and consultation at pit level. Industrial relations have been destroyed. There used to be discussion resulting in changes in the interests of the industry. Output per man shift climbed like billy-o while I worked at the pit, but that has all changed because of the Government's policy.

Mr. John Marshall

The hon. Gentleman talks about productivity in the pits. Does he accept that since the miners' strike there has been a dramatic growth in productivity throughout the industry?

Mr. Haynes

There has always been growth in productivity in the mining industry. The hon. Gentleman has not looked at the history of the mining industry. I stand here as part of its history. Productivity has increased for years and it will increase even more in future.

Mr. Don Dixon (Jarrow)

The hon. Member for Hendon, South (Mr. Marshall) has never even seen a pair of overalls.

Mr. Haynes

That is right. He has never had a tool in his hand——

Mr. Hoyle

I would not bet on it.

Mr. Haynes

I thought that the hon. Member for Hendon, South (Mr. Marshall) would enjoy that one.

Mr. Hoyle

I do not think that the hon. Member for Hendon, South will get up again.

Mr. Haynes

I do not think he will, either.

Progress has been made. Because of the new system, in addition to doing away with the mine cars, the cage has been converted to what we call a skip, which holds 14.5 tonnes of coal. That is a lot more than could be carried in six tubs.

Mr. Dixon

What is a skip?

Mr. Haynes

The chair is used to carry men and materials needed in the pit. The operator need only open the chair's floor and tip the coal out. The coal now travels from the coal face on conveyor belts all the way to the pit bottom into the skip, from which it is poured into the chair and then taken up the shaft. That is progress. It has helped to increase output per man shift. That progress will continue because we get the bright ideas from the laddies who work at the pit point on the coal face and in the distribution sector.

I am not saying that we do not have problems. There is one in particular. When we started to use conveyor belts, it meant that there was one main conveyor belt onto which all the coal faces tipped coal. If that conveyor belt went wrong, the whole pit went wrong because all the eggs were in one basket. We must get over that problem. We must carry with us the men who are doing the job in the pit. As one who worked in the pits for many years, I believe that those men do a marvellous job in the interests of our economy, but there is something—I am coming to the unfair part—that those lads back in the pit do not like.

My ex-mining colleagues and I will raise at every opportunity the question of unfair competition from America and Australia—[Interruption.] I do not know why the hon. Member for Hendon, South is laughing; this is a serious matter. For a day or two we have been talking about the problems in South Africa and the way the South Africans carry on. The South Africans run their pits by slave labour. How can we compete against that? That is totally unfair competition. The South Africans pay those who work in the pits next to nothing. The big white bosses hold big whips over the workers' backs. When I was a lad at the pit I had a whip held over my hack. I have experienced everything.

Mr. Hoyle

Now you are a Whip yourself.

Mr. Haynes

I enjoyed that. We get some smart interventions on this side of the House; they are a bit dowdy on the Conservative Benches.

I was making a point about unfair competition. All that has got to change. Up in the coalfields we have all that coal beneath our feet. It is there, and it can be got, and it can be got cheaply, provided that the men who work it are given a fair chance. We shall have to come back to this subject at a later stage.

I realise that the coal will not last for ever——

Mr. Hoyle

I am listening with great interest because I know of my hon. Friend's expertise in the mining industry. Does he intend to deal also with the unfairness mentioned by the hon. Member for Gordon (Mr. Bruce) arising from the privatisation of electricity? The Government are talking about free competition for coal but not for nuclear power.

Mr. Haynes

Yes, I shall come to that later, but at the moment I am dealing with the unfair competition from America and France, but particularly from South Africa and Australia. I have mentioned the use of slave labour in South Africa. I am sure that the hon. Member for Darlington will agree that we cannot compete with that.

The Department of Energy appears regularly to say that we should be going for opencast coal. I live in a mining village. We have a pit just down the road called Annesley. We also have opencast mining just down the road; surface mining has taken place there for a long time. I bet Conservative Members do not live near opencast mines. It is murder; it really is. Some people have had to suffer the effects for 30 to 40 years and they have had a bellyfull. The youngsters of today are saying, "We are having no more of it."

British Coal wants to extend the surface mining nearer and nearer to people's properties, but those people have had enough of the dust and noise and everything else and they do not want anymore. I do not think that the Minister realises what he is actually saying when he suggests there should be more opencast mining. It is easy on paper to say, "We can increase coal output by extending surface coal working." But we must consider the suffering that it has caused for many, many years. We talk about pneumoconiosis in the pits, but some people have got pneumoconiosis by working near opencast mines when they should be breathing God's clean air.

The Under-Secretary of State for Health and Social Security makes me sick with some of the comments that she comes out with. She tells people what they should eat and she tells them that they should not smoke. I would argue for freedom of the individual to decide those things. Then she goes to the Tea Room to eat bacon and flipping beans. I ask you, Mr. Deputy Speaker. That is not fair at all; it is totally unfair. The hon. Lady is always yawping outside in front of the television cameras. If she spent more time looking at hospitals and the services that are not being provided instead of being stuck in front of a TV camera, we might get a better Health Service. But I am wandering from the debate, I am sorry, Mr. Deputy Speaker, but that is how I feel when I listen to the comments of Ministers who do not understand the problems of ordinary individuals.

I shall deal with the points made by my hon. Friend the Member for Warrington, North about unfair competition in the electricity industry. The Government have a majority of 101. On the very same day that they were bragging about the money that they have poured into people's pockets in the Budget we heard it announced that electricity prices were to increase by 10.7 per cent. in the south-east. That will leave people in debt, never mind putting more money in their pockets. That money will go, and more with it, because of the massive increase in electricity prices.

We should not have unfair competition from the nuclear industry. We must watch the nuclear industry very carefully. I am very concerned about what is happening. Conservative Members say, "You don't have to worry about safety. Everything's OK. There will be no problem." Then Chernobyl drops on our head and we are all affected by it—even thousands of miles away. We need only one mistake at one power station and every one of us is affected by it. It is no good the Government preaching to us that everything is OK. They used to tell us that in the pits, but things still went wrong; we saw bodies carried out and people lost limbs. Something has to happen before anyone moves. We must get away from that attitude and we must ensure that everything is really OK in the interests of the people. We should take a stern look at the nuclear industry. It creates unfair competition, and it does not give us a real chance. It is on that point that I finish.

11.17 am
Mr. Ian Taylor (Esher)

I am delighted to follow the hon. Member for Ashfield (Mr. Haynes), who gave us a riveting display on a variety of issues. I am a great admirer of his knowledge of the coal industry, but I had not realised that he knew so much about Equity and the problems of the film industry, although it is clear from what we saw today that he has had some training as an actor. His knowledge of sporting events is clearly profound, and I am grateful for his advice on what I should put my money on in several of the competitions still to be played. But when he reached competition policy, the hon. Gentleman scored a long series of own goals. I hope that he will play for all the opponents of Doncaster before the end of the season if he wishes the club to stay in the third division.

I am delighted to be able to follow the lead given by my hon. Friend the Member for Darlington (Mr. Fallon) who gave a comprehensive review of the moves forward in competition policy. I apologise in advance for the fact that I shall not be present when my hon. Friend winds up the debate because I have to speak at a conference in Ashford in Kent at lunchtime. It is sponsored by the Hansard Society—that is probably appropriate—and Eurotunnel, which is relevant to some of the remarks that I shall make.

First, however, I congratulate my hon. Friend. I have always admired the way in which he courageously speaks up for competition against too many Government handouts. He sits for a northern seat and his success in being re-elected convincingly at the last election shows that many people in the north respond favourably to opportunities and incentives given by proper competition and economic development rather than the constant threat of the distortion of the market by over-generous state handouts.

Mr. Hoyle

Does the hon. Gentleman think that Nissan would have located in the north-east without generous Government handouts?

Mr. Taylor

That encouragement for Nissan to locate there is causing embarrassment to several British car companies because of Nissan's levels of productivity. Nissan's presence will encourage other companies in the British car industry to perform better.

My hon. Friend the Member for Darlington has a connection with the Department of Energy. I should like to congratulate him and my right hon. Friend the Secretary of State for Energy on the courageous view that they took of the privatisation of the electricity industry. Contrary to Labour Members, I regard it as being something for which the British consumer will be thankful. It shows that we have learnt the lessons of some of the mistakes that we made in the privatisation of British Telecom.

There is no doubt that Britain responds to and needs competition. Competition leads to massive benefits for the economy and the consumer. There are the further benefits of industry being able to lower its prices, thus benefiting other industries and the consumer.

The comments of the hon. Member for Ashfield prompt me to remark that one of the saddest aspects of the continuing battle between the South of Scotland electricity board and British Coal is that the concentration has been on the possibility that certain jobs might be lost in the industry — despite the fact that the coal that it is producing is not of a competitive quality—rather than the benefits of the creation of many more new jobs in Scotland if there were to be a reduction in the price of electricity to other industries. Conservative Members are prepared to think positively in the interests of people in the regions and Scotland. I hope that common sense will prevail and that the SSEB will be able to carry through its proposals and bring down prices, to the benefit of Scottish companies.

One of the objectives of competition policy is the protection of the consumer. In principle, that is the only reason why Governments should intervene. Protection of the consumer is a justifiable case for Government action. In that context, I warmly welcome the two recent Government papers on merger policy and the review of restrictive trade practices policy; they make very important contributions to the debate.

The review of restrictive practices policy, which is a comprehensive document, touches on the matter with which I want to deal—the implications of competition and restrictive practices within the European Community. The proposals in the document, in moving towards an effects-based form of legislation, are falling more into line with the EC's proposals.

It is important to remember why such harmonization is important. Page 7 of the paper says: For example, an agreement between two or more UK parties may affect trade between Member States because it makes it more difficult for competing manufacturers from other Member States to sell into the UK market. Furthermore, the need for UK companies to take account of EC competition law has grown as business has become increasingly international. I would be the first to admit, and agree with the Government, that EC law does not constitute a complete instrument for effective and comprehensive control of restrictive practices in the United Kingdom. We therefore need complementary United Kingdom legislation.

What is vital, however, is that, in this and other vital sectors, we ensure the development of the European Community so that we can influence the proposed framework of laws and take domestic action to ensure that British industry is assisted or at least not disadvantaged.

In effect, by 1992, the European Community will be the new domestic market. Concepts that have existed to date have assumed that the British Isles was the domestic market, but that will no longer be the case. Commissioner Peter Sutherland of the European Commission has been instrumental in drawing that issue to the attention of a wider public audience.

Proposals are being brought forward that are of immense importance. In summary, nearly all mergers, takeovers or joint ventures that have a combined annual turnover of £690 million—about 1 billion ecu—must automatically notify a Commission merger control unit before going ahead with a deal. That figure refers to world rather than Community sales of companies. It applies to anyone acquiring operations within the EEC, even if the bidder is not European. So long as the deal has an impact inside the European Community, it is potentially covered — a concept that also exists in other parts of Community competition policy.

The exceptions to that rule are where the company being taken over has annual sales of less than 50 million ecu or where more than three quarters of the merged group's turnover is in only one member state. This clause was slipped in to counteract fears that the Commission was trying to override powers of national takeover authorities.

Financial services companies will have different criteria, and banks and financial institutions are covered if their combined assets are more than 10 billion ecu. Insurance companies are caught when their joint premium income is more than 1 billion ecu.

The European Commission estimates that, overall, between 100 and 150 deals will have to be notified annually, of which it would change or block perhaps two or three. As William Dawkins of the Financial Times has said, if this continues, most of the larger British companies will have to pay increasing regard to how and on what terms the European Commission should intervene.

The internal market comprises 320 million people. That provides industry with a target of 80 million more customers than the United States, and it is three times the size of the market in Japan. It gives an idea of the scone and potential that is possible as long as we ensure that rules to protect the consumer in that market are logical and effective.

It is reckoned that up to one tenth of the joint GDP of the European Community is wasted because of lack of proper internal market regulations. There have been many obstacles to competition, and until 1987 there were 70 different customs forms and up to 35 were required at some border posts. Imagine the difficulties for anyone even bothering to trade if they did not have to, when faced with such bureaucratic nonsense. At least, on 1 January 1988, those many documents were replaced by a two-page single administrative document, which is a much simpler document and which will assist communications within the European Community. In 1992, there should be no forms at all.

Some of the implications of the internal market will be dramatic. We perhaps need to prepare ourselves by thinking them through. My hon. Friend the Member for Darlington mentioned the professions. The professions, who almost invented the words "restrictive practices", will need to think carefully about how they will react to the probable changes in European Community legislation.

In theory, it will be possible for anyone to contract with an accounting company in any of the other 11 member countries or to ask for quotations from an insurance company in, say, Madrid or Rome rather than London. That will call into question more rapidly than anything else the need for equalised qualifications in the 12 countries for entry into the professions and what the internal rules and standards should be. The effect will be dramatic, especially in the means of entry to a profession and the extent to which the professions — the legal profession is the most obvious example—still maintain separate areas of activity.

Another area that will be transformed by the internal market is transport. That aspect is vital to the effective supply of services to consumers. At present, it is estimated that transport costs account for 7 per cent. of the cost of goods traded internally in the Common Market. I congratulate the Government on the leading role that they have played in reducing the cartel in the air transport industry for the benefit of the many people who travel for business or pleasure within the European Community.

In the past few days, however, I have been saddened at the news that the European Community Transport Ministers have failed to make progress in liberalising the road haulage industry, apparently because of West German objections. I was delighted to hear that the British Government had refused to agree the proposals on the table because they did not go far enough. That shows the extent to which we have become leaders in Community thinking and likely to influence the speed and direction of its development.

Another aspect of the way in which the internal market will open a range of opportunities to the consumer, as well as potential difficulties for companies if they do not react quickly, is the fact that a product legally sold in one country will be entitled to be sold in all 12 countries without the need for further testing. There may be dangers in that, and we must be on our guard, but we have time to ensure that sufficient safeguards are built in. Companies must bear in mind that we are likely to be advancing in that way, and they must take the correct measures to ensure that they are capable of competing in those circumstances.

Before 1992, there will be a rush to effect takeovers within the Community. The British press tends to highlight British bids for American companies — it seems to be regarded as the natural order that the Anglo-Saxon world should stick together, and that aspect tends to be regarded as the most important—but I predict that slowly, or perhaps even dramatically, attention will shift to takeovers within the Community.

At the moment, there is an interesting takeover battle in which the Italian Carlo De Benedetti is trying to take over the Société Générale de Belgique to turn it into an effective European financial institution. The United Kingdom newspaper industry is attempting to take over French newspapers such as Les Echos. Dixon's has made a bid for a large Spanish electrical retailer chain so as to establish a good position ready for the opening of the internal market.

Other countries will seek to buy into this country. At present, Britain is basking in glory. When I lived in Paris in 1975–76, it was almost embarrassing to be British. The hon. Member for Sedgefield (Mr. Blair) smiles — his memories of the Labour Government are probably as embarrassing as mine. When I discussed matters with French politicians, they expressed sympathy for me because, although I was living in Paris, I was still paying taxes in Britain and the British disease was leading this country to rack and ruin.

All that has changed. Today, we are at the top of the growth tables and the French Government, despite a Socialist President, are rapidly pursuing all the sensible economic policies which the British Government have shown to be effective since 1979. Privatisation policies in France are modelled on the British example, and French merchant bankers come to London to see how it is done. French economic policy is very much modelled on the Thatcher revolution.

The situation was very different when the French Socialists first came to power in 1980. They began with a burst of Wilsonism and vast public expenditure, with the usual results.

Mr. Robert N. Wareing (Liverpool, West Derby)

The hon. Gentleman seems unaware of the French constitutional situation. In the past two or three years, the French Government has been in the hands of Chirac—a devotee of Thatcherism — so it is not a Socialist Government. The hon. Gentleman should be aware of that principle of cohabitation, although it is likely to end with the French presidential election in May.

Mr. Taylor

I am grateful to the hon. Gentleman for confirming what I have said. When the French Government came to power in 1980 there was not only a Socialist President — Mr. Mitterrand is still a Socialist President—but a Socialist Prime Minister, who led the country to near rack and ruin by following exactly the policies that the British Labour Government followed between 1976 and 1979.

Mr. Chris Butler (Warrington, South)

History is not my best subject, but did not the French Socialist Government have to turn back on their tracks and begin denationalisation before Chirac came to power?

Mr. Taylor


Mr. Deputy Speaker (Mr. Harold Walker)

Order. We are getting further and further away from the motion before the House. Perhaps we could direct the debate a little more towards the terms of the motion.

Mr. Taylor

I am always grateful for your guidance, Mr. Deputy Speaker. I shall leave the final points of French political life in the safe hands of a non-Socialist Prime Minister pursuing policies which I am sure will be as successful in France as they have been in this country.

The main thrust of my case is that competition policy must be seen in a European context. The legislative proposals and papers put forward by the Department of Trade and Industry make a welcome reference to this. There are bound to be difficulties, as there always are when different countries and cultures come together, and there will be a settling down period.

When I spoke to the managing director of a Franco-British car company the other day, he commented that, after the takeover of his company, a senior manager had come over here because he was worried about a local difficulty in Scotland. The French could not understand why the problem had not been solved immediately by sending in the priest. That is not the usual British way to solve a factory dispute in Scotland, although from what I have seen of the Ford situation in Dundee the priest may be the unions' last resort after the mess they have made of the opportunity to create new jobs in that area.

It is sad indeed that this country still has people who, like the leaders of those unions, do not understand that companies such as Ford no longer need to have plants in areas such as Dundee but can move anywhere in the European Community. That is a lesson that we must all learn. Competition opens up great opportunities, but if we refuse to respond to the incentives that it provides we will be caused an immense amount of heartache. That is what the people of Dundee will suffer unless the unions come to their senses.

To assist the development of competition, we must prepare for the internal market. Recently, the chairman of the CBI Europe committee, Mr. John Raisman, made some valid points about what British companies should do to prepare for 1992, and they deserve a wider audience. He suggests that companies should review and consider the following: First how their business is organised in Europe, including the staffing and location of their corporate Headquarters; Second their distribution and transportation arrangements; Third the number, size and location of their manufacturing plants, warehouses and depots: Fourth the scope for standardising their product range and its implications for production, design, packaging, sales promotion and advertising; Fifth their marketing networks and sales offices: Sixth their R & D and capital investment programmes, bearing in mind the opportunities for European collaboration; Seventh their provisions for information technology, where at least some rationalisation and simplification should be possible: Eighth the scope for joint ventures, mergers, acquisitions and cross border alliances"— I have already referred to such scope in this debate— Finally they must review the recruitment, training and development of staff, with particular emphasis on language ability. British industry still has room for improvement. The Red Book has shown that productivity is growing fast, but our productivity rate is still one third lower than that of our principal competitors. Private sector spending on R and D and training is still too low. There are also regional imbalances in the attitude of many companies towards the opportunities provided by the European Community.

The Government have made dramatic strides in the way in which they have rethought their attitude to competition. Their proposals contained in the documents on mergers and restrictive practices are extremely welcome. British industry is awakening to the opportunities provided. Consumers are becoming much more vociferous about what they consider to be their rights and opportunities.

In 1992 we will have a market of 320 million people—it will be our domestic market. We would be unwise if we did not grasp the opportunity presented to us to ensure that the development of the Community market is sympathetic to British attitudes and legislation, and that British companies triumph.

11.42 am
Mr. Tony Blair (Sedgefield)

First, I should like to congratulate the hon. Member for Darlington (Mr. Fallon) for choosing competition policy as a subject for debate. The hon. Member for Darlington is somewhat unusual in that, whereas many Conservative Members wear the garb of Thatcherism as a temporary expedient, he believes in it.

I believe that the hon. Gentleman's speech demonstrated the essential weakness of the Thatcher philosophy. He informed the House, in terms that I fully endorse, that many of our high street stores are dominated by large conglomerates. He spoke of the electrical goods industry and how companies such as Dixons and Currys dominate that market. He spoke about tied pubs and the small variations in the price of, for example, lager. He spoke of the large industrial conglomerates operating in large sections of the market and about the books industry and how the price of books has remained static for the past few years. The hon. Gentleman illustrated, by a range of examples, how big business dominates the market and how competition is often squeezed out as a result. However, it is the free market that he endorses and, in some respects, worships, that has led to the abuse of power and monopoly.

The hon. Gentleman must accept the central argument that it is only if Government are prepared to intervene on behalf of the broader community that we can act to ensure that the market responds to the interests of the people. Their interests and the interests of the market are not always the same—a free market is not necessarily a fair one.

I summarise my argument under four headings. First, a deregulated market is not the same as a competitive one. A tough regulatory regime lies at the heart of a competitive market that responds to the interests of consumer. Secondly, we do not assume, unlike the Government, that the interests of the private sector and the interests of the public always and naturally coincide. That is especially so with regard to monopolies and mergers. In that respect, we believe that there should be a broader view of what constitutes the public interest. That should take account of the competitive effects of potential mergers, but also take account of wider considerations.

Thirdly, a competition policy must be buttressed by effective rights granted to consumers. As my hon. Friend the Member for Ashfield (Mr. Haynes) has said, there are many ways of making industry responsive to the consumer rather than simply relying on a competition policy. A panoply of consumer rights are required when one considers the large, private sector monopolies that have been created by the Government, for example British Gas and British Telecom or when consumers are adversely affected by the restrictive practices of particular trades.

Fourthly, the Office of Fair Trading, or whatever new regulatory body is introduced by the Government, must, if it is to perform its new role of seeking out restrictive practices, have adequate staff and resources to accomplish that task. It should be free to take an active role to seek out anti-competitive practices rather than simply reacting to complaints made to it.

Over the past few years mergers have occurred in a greater volume than at any time since the war. In 1983 spending on mergers was some £2.7 billion a year; in 1984 it rose to £5.9 billion; and in 1987 almost £15 billion was spent on merger activity. That merger phenomenon has occurred especially in this country, although it has been repeated in the United States.

Present Government policy is to refer mergers primarily on competitive grounds. That doctrine was established first by the right hon. Member for Chingford (Mr. Tebbit.) and endorsed in the recent White Paper published by the DTI. In fact, under 5 per cent. of qualifying mergers are referred to the Monopolies and Mergers Commission.

Recently the Government published their paper on mergers policy. I believe that there is an interesting contrast between that paper and the paper on restrictive trade practices, though the author, Mr. Leisner, was the same. Although the restrictive trades practices paper is written with genuine fervour and sincerity, it strikes me that the mergers policy paper is more an illustration of Government ideology than a rigorous analysis of the problems of mergers.

As a spur to competition the mergers policy paper is quite pathetic. Indeed, I was surprised that the hon. Member for Darlington did not pick up on that more forcibly, but he did hint at it. It is not that the document's proposals are not necessarily bad if they are correctly administered—and that is an important point. However, what are the proposals? They include an attempt to reduce the delays in procedures through the Office of Fair Trading and the Monopolies and Mergers Commission and that attempt is perfectly understandable and good —the pre-notification procedure and the OFT's ability to secure undertakings as opposed to a full reference to the MMC. Those aims are not necessarily bad. However, we must notice that their effect is not to hinder mergers or acquisitions or to protect competition, but to facilitate mergers.

The only proposals that the merger policy document offers are those which make mergers easier. They do not obstruct mergers. That is not always necessarily bad and some mergers are obviously necessary. However, it is interesting that a document stimulated by a concern that merger activity was having adverse effects on the economy should result in a document which takes as its principle the Government dogma that the free market should be allowed to facilitate mergers in an easier way.

Mr. Maude

The hon. Gentleman makes the mistaken assumption that all mergers are bad for competition. That is patently not the case. He believes that if we are concerned about competition we should inhibit all merger activity. We are aiming through the proposals to focus merger control activity on cases where competition is the major issue. We believe that that is the right approach. The idea that all merger activity is somehow malign is manifestly absurd.

Mr. Blair

With very great respect, I thought that I had prefaced my comments by saying precisely the opposite to that. I accept fully that not all mergers are bad. Of course some mergers are perfectly rational in industrial terms and some serve the wider interests of the economy. However, the converse is obviously not true that all mergers are always good for the economy. Therefore, if we accept that — which I assume that we do — it is bizarre that a mergers policy document should produce proposals whose only impact is to facilitate mergers rather than to obstruct them.

The central weaknesses of the mergers document are best illustrated in the paragraphs to which the hon. Member for Darlington referred. The particular paragraph relates to public interest issues other than competition. We believe that competition is an important aspect of mergers policy, but wider account should be taken of public interest than exists in present policy. The pargraph states: Many of those submitting views to the review have mentioned a range of issues, other than those concerning competition, which they believe would justify intervention by the Government. Some of the issues most commonly mentioned are the effects on employment, on regional economic development, and on research and development spending by companies; the consequences of high leverage bids; and foreign takeovers (including reciprocity). The next part is interesting as it reveals the Government's view. Throughout this document, as opposed to others, the Government's view is constantly tendered. I wonder whether that hides a rather greater scepticism about Government ideology on the author's part than is manifest by Ministers. The document continues: The Government's view is that none of the matters mentioned above"— employment, regional policy and so on— is one where the public interest typically diverges from the interest of private sector decision-makers, although it is recognised that in exceptional cases it may do so. Normally, therefore, the decision should be left to the market. That is quite bizarre. It is nonsense to claim that private sector decision-makers, when deciding whether to merge or to acquire another company, take account of employment, regional economic development or some broader notion of research and development spending by companies. I do not blame them for not taking account of that. A company's purpose is to obey the interests of its shareholders and to take commercial decisions in the normal way. The Government must take account of employment, regional policy and broader questions of industrial policy. It is ridiculous to assume that in a merger acquisition the private sector will operate in the interests of the wider economy on matters such as employment and regional policy. I am not saying that they will not sometimes coincide. However, it would be wrong to suggest that private companies go about their business worried about the effects on regional policy.

There can be no better example of that than the recent bid by Barker and Dobson for the Dee Corporation. Ultimately that bid was warded off. Barker and Dobson made a bid for the Dee Corporation with a high leverage bid. However, people would have been affected thoughout the country and particularly in the north, Scotland and Yorkshire where there are high areas of unemployment. People there were very worried that the sale of Gateway Superstores—a part of the deal—would result in the loss of jobs. It is absurd to assume that such a bid will take account of regional or social policy issues and to assume that the interests of the work force are necessarily those of the acquiring company. One of the weaknesses of our merger and acquisition policy is that we give plenty of say to the shareholders but none to the work force, who surely have as much interest as the shareholders in what happens. Ultimately they produce the wealth that the shareholders can distribute.

Mr. Ian Taylor

A thought has struck me in this connection. Given that the shareholders rejected the bid from Barker and Dobson, they must have taken into account the interests of the workers and the regional distribution of the Dee Corporation's activities.

Mr. Blair

I do not think that that follows, although the hon. Gentleman may be right. I think the shareholders were taking into account the dodgy nature of the way in which the bid was mounted and financed.

The only point I am seeking to make is not that firms never take account of social, economic or employment issues—of course they do—but that one cannot run a merger policy on the basis that private sector interests and broader public interests in employment and social issues will be the same. They will not; they will often conflict. So I am arguing for a broader doctrine of public interest that takes account of factors wider than mere competition.

A good case could be made for a broader public interest definition for high leverage bids. I have corresponded with the Minister about the Barker and Dobson bid for the Dee Corporation, and the way in which it was financed. When an acquisition is financed by a system of loans that requires selling off a large part of the assets of the company being acquired, as a means of paying back the loan to acquire the company, serious questions about the broader public interest are raised. The necessity of selling off parts of the business to repay the loan has nothing to do with the broader public interest; it has to do with the need to pay off the loan that was raised to acquire the company. This is an area in which the public interest needs to be defined more broadly than in terms of simple competition.

I turn now to one of the most interesting parts of the Government document, which justifies my criticism of it. It is clear that the effect of acquisitions and mergers on the new companies that are the products of such moves is at best of doubtful benefit, and at worst damaging or deleterious. The CBI report of last year on "The City and Industry", in many ways an inadequate document, says of this topic: while acquisitions may have created wealth for shareholders they are clearly not a prerequisite for industrial success, since contested takeover bids are virtually unknown in West Germany and Japan. Even more interestingly, annex E of the White Paper, which the hon. Member for Gordon (Mr. Bruce) mentioned, comes to the extraordinary conclusion that post-merger performance rarely lives up to the promises made by the acquiring company at the time of merger. Far from private sector mergers having a beneficial impact on companies — never mind the broader economy — the impact is, if anything, the other way round. Annex E states: Evidence on post-merger performance … supports the earlier findings of disappointing or inconclusive performance. Indeed, the consistency of the results of the various studies and the wide range of approaches used tends to reduce the force of the methodological limitations and to increase the robustness of the findings. If ever a case were needed for maintaining that a broader concept of public interest was required, here it is: the Government report says that post-merger performance does not live up to the promises made at the time of merger.

Mr. Malcolm Bruce

Does the hon. Gentleman agree that evidence also points to the regrettable fact that mergers seem to have no mechanism for being unravelled or resolved when they fail to live up to expectations or worse, such as in the case of Guinness or, conceivably, British Airways, where promises were made to shareholders and were then sharply and fundamentally broken? Do we not need powers that will sort out things like that?

Mr. Blair

That is correct, and I intended to raise that matter later in my speech.

It is extremely difficult to say that one should have a very narrow concept of public interest that virtually equates to competition when looking at merger policy. The conclusions that seem to flow from an analysis of present merger policy are first, that it is right to include a broader public interest concept in mergers. We shall not lose efficiency by doing so. Indeed, there may be a gain. I support what the hon. Member for Surrey, North-West (Mr. Grylls) said about small and medium firms.

Secondly, when there is a hostile bid, there is a case for saying that the acquiring company should show positive benefits before the merger is allowed to proceed. That seems to flow from the fact that post-merger performance has been extremely disappointing. Thirdly, there should be some right or say for information, advice or assistance so that employees who find themselves treated like chattels in a merger or acquisition, and who have no powers or rights in the situation, can be protected.

Fourthly, there should be much stricter control of nominee companies and an earlier declaration of the stakes, which would be not at 5 per cent. but at more like 2 per cent. Finally, there is a good case for the Office of Fair Trading publishing, in the case of large mergers and acquisitions, some sort of post-merger analysis of exactly how much that merger or acquisition has led to competitive benefits. As an adjunct to that, it may well be an idea when some of these large mergers or acquisitions take place for some of the major companies such as Hanson or BTR Industries to publish separate accounts for the subsidiaries that they have acquired. We might then be able to see exactly what has happened in such companies after acquisition or merger.

On the strength of this paper on merger policy the Government are lementably failing to live up to their own rhetoric about competition.

I admit that a different situation obtains when one looks at the review of restrictive trade practices policy in the Green Paper. Strangely, once again that was written under the chairmanship of Mr. Liesner. That paper seems to run in a different direction from the other one. Whereas the other one appears to rely excessively on Government dogma about the private sector, this one recognises that a regime of tough regulation is required to enforce competition. That was borne out by the 1979 review of the last Labour Government which lay on the shelf for many years before the Government got round to updating it.

I endorse many of the proposals in the paper. I endorse the move from a legal form-based test of whether a practice is in restraint of trade to an effects-based test. That seems right. I also welcome the general prohibition on anti-competition agreements rather than the present requirement of registration and the stronger powers of enforcement in the new Office of Fair Trading. I also welcome the fact that if the proposals in the Green Paper are carried through, third parties can sue. I assume that that means consumers as well as competitors.

I should like to put a few questions to the Minister about the Green Paper, and my first question is about exemptions. Will the proposed legislation cover all professions and sectors so that each profession or sector has to argue each exemption on its merits, or will there still be exemptions for entire sectors? Will that continue to be permitted or will the profession or sector have to argue each case afresh? There is no reason whatever for any professional sector or service to be outside the remit of the restrictive practices law.

Secondly, the Green Paper takes as its starting point article 85 of the treaty of Rome. That has the great advantage of regarding as a trade restraint both agreements and concerted practices, which is not the case under the present legislation. When interpreting and defining concerted practices, shall we follow the wide definition used by the European Court and the European Commission, which will catch those matters which fall short of agreement, but which operate on a nod and wink? For example, I have always been suspicious of some of the activities of large petrol companies and of the way in which they raise prices together. When such a practice occurs over a number of years, there may not be agreement to collude, but, none the less, the effect of the practice is anticompetitive. Will the new definition be as broad in its ambit as the European Court has defined article 85?

Thirdly, under the Government's proposals, the Office of Fair Trading will have a radically enhanced role as a regulatory body. I am told that, at the press conference for the launch of the Green Paper, it was stated that no extra resources or personnel would be given to the Office of Fair Trading. There is no way that that office can take upon itself the increased burdens of an effects-based system, under which it will be entitled and obliged to take a much more active role without having the proper teeth and resources to carry it out. It would be foolish and a false economy, if they were not provided.

Fourthly, I should like to ask the Minister about class actions. Many people have been appalled by the recent Opren drug case, in which many people suffered great damage, and the amount of compensation handed out, but that is only one facet of a range of difficulties facing consumers. Often, individual consumers lose only £500 or £1,000, yet, overall, many millions of pounds may be lost. If consumers have to sue individually, they are placed in extreme difficulty. The Opposition support the ability of consumers to take class actions to enforce their rights as a group against companies that have engaged in restrictive practices to the detriment of consumers.

Finally, I wish to comment on the European internal market. This morning the Department of Trade and Industry launched its campaign for the internal market and the Minister kindly provided me with a copy of his Department's press release. There is a great difference between that and the pre-publicity provided by the Government and embassies abroad in preparation for this morning's press conference. Hon. Members will recall that a feature of the Government's inner-city campaign was the breakfasts with business people around the country. Originally, the campaign launched this morning was to be fuelled by what the Government calls 19 high-powered breakfasts around Britain. The British embassy in Brussels put out a press release which I have rightly described as eccentric in its terms. The headline states: Breakfast launch—Britain in Europe's single market". It continues by saying that the most tasty stage of the campaign will begin on 18 April with a breakfast. At last, the breakfast motif appears to be on the wane, as this morning's press release did not mention breakfast. It has been retitled as a conference. I do not know whether the business men who go from one breakfast to another under the Department of Enterprise's scheme will not now be fed, but I am glad to see that the Government are treating the internal market a little more seriously in embassies overseas.

The internal market poses questions of very great importance in relation to competition policy in Europe. During the last few years there has been an accelerating wave of mergers and acquisitions. In the last two years there have been 68 Euro-mergers, including $7 billion worth of Euro takeovers last year. British acquisitions on the continent are higher now than British acquisitions in America, and this year they are about 40 per cent. up on last year. A tough regulatory regime will be required by the European Community if we are to guard the public interest against this wave of mergers.

Another major danger of the internal market is that it could be dominated by big business interests, to the detriment of smaller and medium-sized firms. The internal market will introduce a range of changes to our trading system. We have not even begun to face up to the risks as well as to what people call the opportunities of the internal market that will be provided over the next few years.

The big European conglomerates have already formed themselves into a European round table of the 25 major industrial giants, including several of our own. They are monitoring every change that goes through the EEC. Many companies and financial institutions — for example, Barclays bank—have their own special unit to monitor the changes that will result from the internal market. They will be very well placed not merely to accommodate the internal market but to dominate it, unless our Government have a proper industrial policy to ensure that British industry is adequately geared up to face the competition. It will take much more than breakfasts and brochures to ensure that Britain is able to compete in the internal market.

This Government are caught between their hands-off, non-interventionist and "free means deregulated" ideology and the reality that without an active, interventionist Government the free market—so-called—often leads to monopoly and to lack of competition, which is adverse to the broader interests of the economy. We have to look only at what has happened to British Telecom and British Gas, and at BP pursuing Britoil and British Airways pursuing British Caledonian, to realise that simply to put such organisations into the private sector does not make them competitive or free, or make that freedom work in the interests of the broader economy. Only by a mixture of a tough regulatory regime and rights for consumers shall we be able to protect the public against the abuse of power and the economy against stagnation and inefficiency. But that task is infinitely better suited to the Labour party than it is to this Government.

12.12 pm
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude)

In the time-honoured fashion, I congratulate my hon. Friend the Member for Darlington (Mr. Fallon) on being the first in the ballot for private Members' motions. I congratulate him also on his great wisdom in choosing competition policy as the subject of this debate. My hon. Friend the Member for Surrey, North-West (Mr. Grylls) made the point that it is some time since we have had such a debate. Some say that it has been far to long. I am grateful for this timely opportunity to air the issue. I am only sorry that, although a number of my hon. Friends have been present and keen to take part in the debate, the Opposition Benches, despite the Labour party's professed interest in competition policy, have not been over-populated.

Mr. Blair

I must correct the Minister. There have been several Members on the Opposition Benches. Furthermore, the Conservative Back Benches are hardly over-populated.

Mr. Maude

My mathematics may be inaccurate, but I have counted only one Labour Back Bencher. As the hon. Gentleman knows, Whips are not Back Benchers.

Be that as it may, interest in this debate has been considerably greater on this side of the House. It represents an underlying political reality: that the Government understand about competitive markets and are interested in them. Throughout the debate, the Labour party, and the hon. Member for Gordon (Mr. Bruce), have sought to criticise, on competition grounds, certain aspects of our policy. In fact they are not criticising on the competition grounds at all. They are criticising on other grounds.

I apologise for my absence for half an hour in the middle of the morning. As the hon. Member for Sedgefield (Mr. Blair) rightly says, I was away helping to launch the Department's campaign on the single European market.

The Labour party is in danger of becoming obsessed with breakfasts. I think that it says a little about the modern Labour party that its members simply do not understand that business men today lead extremely busy lives. The one time of day when it is possible to get them together to put a message across is breakfast time. I am sorry if that offends the hon. Member for Sedgefield. I do not wish to deny him his fun; he does not have a lot of fun as a member of the Labour party at the moment, and I do not begrudge it him, as long as he does not suggest that what we are doing in our campaign is anything but extremely serious.

The hon. Gentleman is right to say that the competitive impact of the single European market is enormous. The effect on business if business is competitive will be beneficial, but the effect on uncompetitive businesses—not only in Britain but throughout the Community—will be harmful. I believe that we are absolutely right, in the interests of promoting competition, to take the step of alerting businesses the length and breadth of the country to the implications of the single European market, and I was grateful to my hon. Friend the Member for Esher (Mr. Taylor), who devoted a good deal of his speech to its importance.

My hon. Friend the Member for Darlington, in the course of his enlivening and thought-provoking speech, took us on a tour of Whitehall. He rightly reminded us of the extent to which uncompetitive practices remain, and of how much needs to be done. I do not think that he needs to be persuaded of our desire and will to tackle anticompetitive practices. I must remind him, however, that if he had tried to take us on that tour of Whitehall 10 years ago, we would not have got very far, because of the thicket of regulation and control in which years of corporatism and collectivism had enmeshed us.

The dramatic growth of the British economy over the past seven years, described by the Japanese ambassador recently as the British economic miracle, bears witness to the liberating, enlivening and invigorating effect of removing regulations and controls, and promoting competition. Talk of the British economic miracle has replaced talk of the British sickness, and what a healthy sign that is. All of us find the hon. Gentleman's tour of Whitehall much less embrangled with regulations and controls than it was, but there is still more to be done.

My hon. Friend talked a little about the multi-fibre arrangement. He will know that the arrangement was renewed in 1986, and that that renewal provided for further liberalisation. We supported it as the best deal available. The GATT contracting parties had committed themselves to examining how textiles and clothing could be returned to strengthened GATT rules.

As we specifically stated in our January White Paper, we see open international markets as essential, and will work through the Community to reinforce the GATT system. Our objectives in the Uruguay round include—I quote from the White Paper— a lasting solution to the problems of excessive protection and subsidies in agriculture —and the liberalisation of services. My hon. Friend also talked about voluntary restraint agreements. He made the error — if I may respectfully point it out to him—of talking about voluntary restraint agreements within my Department. I have to tell him that there are none; the voluntary restraint agreements exist between industries. We take the view that voluntary restraint agreements are for industries to consider for themselves. We keep an eye on what is going on, and I can tell my hon. Friend that Government pressure has resulted in the termination of no fewer than a dozen such arrangements. I hope that he regards that as a promising development.

Mr. Fallon

First, I withdraw any allegation that my hon. Friend's Department is responsible for, or has been fostering, such agreements. However, he has now told the House, which I do not think any of his predecessors have, that his Department keeps an eye on what is going on, and, indeed, that there is some sort of list and that some have been removed. It would be helpful to those of us who follow trade matters if some sort of list could be published in the Official Report.

Secondly, will my hon. Friend respond to my suggestion that there should be more of a balance sheet approach to each individual restraint?

Mr. Maude

My hon. Friend's second suggestion is absolutely right. It is essential to take the balance sheet approach and see what the benefits or otherwise might be. On his first suggestion, if he tables a question to me, no doubt I shall consider how to answer it.

In any arrangement of that sort, there is always a difficulty that the interests of producers are focused and well articulated, but the interests of consumers, who may sometimes suffer as a result, are not being articulated. None of us have consumers coming along to our constituency surgeries saying, "Why should I have to pay 10 per cent. more for my clothes as a result of the multi-fibre arrangement?" That does not happen. However, if there is any suggestion of removing that arrangement, people from the local textile manufacturers certainly come to one's surgery.

Mr. Hoyle

Quite right too.

Mr. Maude

I do not even have to go to my surgery to hear that; I can hear it from across the Chamber now.

It is difficult to take a balance sheet approach such as that suggested by my hon. Friend the Member for Darlington, simply because producer interests are highly articulated and well focused, but consumer interests are, by their very nature, diffuse.

Mr. Hoyle

Does the Minister not realise that the producer is also a consumer and that utterly to destroy the British textile industry, which would be the net result of abandoning the multi-fibre arrangement, would mean that many people would be out of work and could not be consumers at all?

Mr. Maude

That is precisely the type of point that weighs on the minds of Governments when they consider arrangements. I am simply making the general point that the voice of the consumer is not always clearly articulated. That is why we are grateful for the work done by bodies such as the National Consumer Council and the Consumers Association. They articulate precisely the sort of concerns to which I am referring.

My hon. Friend the Member for Darlington referred to the net book agreement. I was grateful to him for doing so. The presumption we are making is that agreements that have been considered under existing legislation will be subject to the new restrictive trade practices legislation, although there may need to be transitional arrangements. Agreements will need to be considered against the new criteria for exemption, and if they do not meet those criteria they will become prohibited. However, we will need to think about the position of agreements such as the net book agreement, which are also subject to resale prices legislation.

In his tour of Whitehall, my hon. Friend the Member for Darlington referred to wages councils and the dock labour scheme. I know that he has a long-standing interest in the dock labour scheme and I do not think that I can usefully add to what my hon. Friend the Under-Secretary of State for Employment told him in a debate earlier this month.

On wages councils, my hon. Friend will know that two years ago the Wages Act 1986 made some important changes which reduced the coverage of wages councils, took all workers under the age of 21 out of the scope of the councils and limited their role to the fixing of one hourly rate and one overtime rate. Again, I hope that my hon. Friend finds that an encouraging sign.

As I have said, debating competition policy now is timely. The Government have just published two papers, one on mergers policy and one on restrictive trade practices policy. I should like to look at what lies behind that, but first I shall say something about competition policy more generally, about the other elements of competition law and the other ways in which the Government can and do promote competition.

I shall start by saying why competition policy is so important. My hon. Friend the Member for Darlington clearly sums up the reasons for that in his motion. It refers to the part which competition policy plays in fostering choice, reducing prices and stimulating wealth creation. Choice for consumers means that firms do not have a captive market, but must work to make sales by offering goods and services which their customers want, and by developing new goods and services.

Firms have to compete on price, which means that they must be as efficient as possible and pass on the benefits of that efficiency if they are to survive. That increases the production of wealth, by ensuring that resources are allocated and used most efficiently, while the capital markets ensure that under-used resources are reallocated through the process of takeover and merger.

It is in free and open markets that competition flourishes. That is why one of the DTI's key objectives is To produce a more competitive market by encouraging competition and tackling restrictive practices, cartels and monopolies". There are two ways in which this can be done. In those where the Government have direct control, we ensure that, wherever possible, the market is opened up to competition, despite what has been said by the hon. Member for Gordon and others.

For example, we have introduced competition into the telecommunications market, which was previously a statutory monopoly. Mercury has been licensed as a competitor to British Telecom, and two new competing cellular radio systems have been licensed. That has meant that from only 20,000 mobile telephones in the United Kingdom in 1981, the market has grown to more than 260,000, and that is a very good sign.

The telecommunications equipment market has also been liberalised, so that, instead of having to rent a telephone from British Telecom customers can go out and buy one over the counter.

Reference has also been made to British Gas. As is well understood, British Gas is a natural monopoly. In those circumstances, it needs to be, and is subjected to, a rigorous system of regulation. I should like to point out to those who say that such a monopoly automatically leads to worse services and more complaints that the Gas Consumer Council, in its recent report, made it clear that the number of complaints has fallen since privatisation.

In transport, coach and bus service licensing have been abolished, allowing the growth of new services at lower cost.

We have worked to liberalise air transport, not only domestically, but in Europe. Again, that has lowered costs and improved services.

Market principles have increasingly been applied to public procurement, with greater use of competitive tendering for construction projects; and we are proposing that local authorities should be required to put a range of services out to competitive tender. As Opposition Members claim to be interested in competition policy and to believe in the benefits of competition, it is extraordinary that those provisions for competitive tendering for local government services have been fought so savagely.

Those are just a few examples of the way in which the promotion of competition is central to the Government's approach. However, in most cases, the best way to bring about free competition is for Government to keep out of the way. That is why an important part of my Department's work and my responsibilities is to reduce the burdens which Government regulation places on business.

If markets are to be kept open, Government must be prepared to intervene where the market is, for one reason or another, not functioning properly. Many business men recognise the need to remain fit and competitive, and to respond to competition positively by producing better products at lower prices.

However, at the same time there is always the temptation to look for the easy way out by seeking to stifle competition or to exploit the lack of it. That is not a new phenomenon. The hon. Member for Gordon paraphrased a quotation from Adam Smith. I would not say that Adam Smith is my usual bedtime reading, but a dose of Adam Smith every now and again does no one any harm. Over 200 years ago, Adam Smith said: people of the same trade seldom meet together even for merriment and diversion, but the conversation ends in the conspiracy against the public or in some contrivance to raise prices. The Government must therefore be prepared to act as the grit in the oyster and to open markets to competition and ensure that they stay open. That is the purpose of competition law.

There are three main elements to our competition law. First, there is the law on restrictive trade practices, dealing with cartels or agreements between firms limiting competition. Secondly, there is control on mergers between firms. Thirdly, there are the powers to deal with monopolies or other anti-competitive practices. The first two have been subject to a review. The results of which we have just published.

The need to subject cartels to scrutiny against public interest criteria has long been recognised. The legislation which started with the Restrictive Trade Practices Act 1956, and led to the Restrictive Trade Practices Act 1976, did this by requiring the registration of agreements containing restrictions relating to the supply of goods and, later, services.

Those agreements were then referred to the Restrictive Practices Court and had to be defended as being in the public interest, or they were struck down. In this way, a great number of agreements were brought to an end, and the legislation was very successful in tackling the overt cartels that were a major feature of British industry after the last world war.

The Act is less well adapted to tackling covert cartels, because of the inadequacy of the investigatory powers and the lack of effective penalties. Furthermore, by concentrating on the form of agreements — I was grateful for the support of the hon. Member for Sedgefield—it enables some anti-competitive agreements to escape by skilful drafting while imposing the burden of registration on many hundreds of insignificant agreements.

I should like to deal with the third of the questions that the hon. Member for Sedgefield raised when he talked about the resources of the Office of Fair Trading. Managing the present system, with its onerous burden of registration of agreements, is already resource-intensive at the Office of Fair Trading, so resources will be released from that rather tiresome part of the present system and will be freed for use in the more pro-active form of activity which will supplant it.

Even where significant agreements are registered, it can take many years for them to be brought to court or for the restrictions to be voluntarily abandoned and, in the meantime, those agreements can be operated with impunity. We therefore propose a different approach to prohibit agreements that have anti-competitive effects.

By concentrating on the effects of agreements in this way, the form of the legislation will be brought into line with its purpose, which is to keep market's competitive. This should ensure that innocuous agreements will fall outside the scope of the legislation, while genuinely anti-competitive agreements—whatever form they take—are caught.

The new authority that will administer the legislation will be based on the existing Office of Fair Trading. It will also have stronger powers of investigation, including powers of entry and search. I do not expect provision of those powers of entry and search to be uncontroversial. There will be those who say that this is an intrusion into liberty, and they will have an argument to make, but we believe that it is justified. If we are effectively to tackle cartels — covert and overt—we need to have those powers.

There will be heavy fines—up to 10 per cent. of a firm's turnover — for breach of the prohibition. As a further deterrent, there will also be a right of private action for those who have suffered loss as a result of agreements. There will be powers to grant exemptions from the prohibition, against criteria which will be spelled out in the legislation.

This approach, as has been pointed out, is in line with that in the relevant European Community Law, article 85 of the treaty of Rome. We have done this because it is a tried and tested approach, and one which exists in other countries as well as in the Community.

The parallel with EC law should help United Kingdom firms by avoiding the need to deal with two sets of laws operating on quite different principles, and is fully in line with the impending completion of the single European market. The approach will reduce the regulatory burden on business by taking many insignificant agreements outside the scope of the legislation.

Much attention has been focused on the effect of the legislation on the professions. In the media, some have presented it as being no more than an attack on the privileges of the professions. That is a misleading view. I am interested to hear that my hon. Friend the Member for Darlington has received many responses from members of the public about the effect of anti-competitive practices in the professions, and I am sure that that will continue.

As a barrister married to an architect, I feel keenly that the effect on the professions is important. The hon. Member for Sedgefield, another member of the bar, has been selfless in promoting the cause. To concentrate on the effects on the professions, however, is to exaggerate the significance of the proposals for the professions and to risks obscuring their importance for all other sectors of the economy. The hon. Member for Sedgefield asked me specifically whether professions would be able to seek further blanket exemptions. The answer is no. Each profession would need to justify each individual practice and gain an exemption for that practice. We shall see an end to blanket exemptions whereby the whole of one profession can do anything it likes without having any of its practices subjected to competition scrutiny.

There are a great many exemptions from the existing Restrictive Trade Practices Act. What we have said is that none of the exemptions will be automatically earned over into the new year. It is right that, when one introduces a new law that works on very different principles from the old one, one should reconsider whether the way in which the legislation bites, or fails to bite, on particular sectors is still appropriate. The professions will be treated in exactly the same way as other sectors.

It is true that when services were first brought within the scope of the legislation in 1976, there was concern that the professions would find it difficult to carry on their traditional functions if they were not exempt, but attitudes have changed since then. It is now generally accepted that, while professionals are expected to have particularly high standards of expertise, conduct and integrity, they are in business like anybody else, and there is no inconsistency between the two propositions.

That is borne out by the many changes in professional restrictions since 1976, which also belie the notion that the Government have hitherto been afraid to tackle the professions. Ask solicitors who have lost their monopoly of conveyancing and who have ended restrictions on advertising and charges; opticians, who lost their monopoly of supplying spectacles; or all the other professions whose charging or advertising rules have been relaxed—accountants, vets and dentists.

Many of those changes came about following reports by the Monopolies and Mergers Commission or the Director General of Fair Trading. The process is continuing. Only last month, the director general referred to the MMC the advertising restrictions of consulting engineers and osteopaths. Many professionals would also tell us that the changes have not lead to a great decline in professional standards, as many predicted they would. Instead, they have resulted in lower charges and a better service for clients.

That makes it entirely natural that the professions should be subject to the same regime as other commercial activities, and means that, in practice, professions may not have all that much to fear, as some of the worst restrictions have already gone. If they can defend the remaining restrictions against the criteria in the legislation, that is all well and good. If they cannot, it is no longer clear why they should be a special case.

The changes that we propose to the system of merger control are less far reaching, and that has provoked sonic discussion this morning. That is because we think that the basic legislation and policy governing references to the Monopolies and Mergers Commission are about right and have worked rather well.

The main, though not exclusive, consideration in deciding whether to refer mergers to the MMC will continue to be their potential effect on competition; that is in line with our view that markets are best left to function freely. That includes the market for shares in companies, which ensures that assets are acquired by those who will use them most productively, and provides, through the threat of takeover, a spur to efficient and enterprising management.

A number of points have been raised about the issue of merger control, which I acknowledge causes interest, and sometimes anxiety, among hon. Members and people outside. The hon. Member for Sedgefield referred to leverage bids, specifically the Barker and Dobson bid for the Dee Corporation. Quite fairly, he said that, in the outcome, the bid was rejected by the shareholders, who were concerned about the performance of the company before merger and what its performance might be after merger. The best control on leverage bids is shareholders taking a sensible decision on what they think the prospects are for those assets before and after merger.

The hon. Member for Sedgefield made much of employment considerations and the regional dimension. His view—I am glad that he dealt with this matter at length, because it highlighted the fundamental difference between the Labour and Conservative parties — is that employment and the generation of economic growth in regions can be enhanced and protected only by Government. We believe that employment is best promoted by businesses being competitive and being able to provide goods or services that customers want. A relatively open system that enables mergers to take place without undue fetters, and provides the spur of threat of takeover, promotes competitive businesses. That is good for competition, employment and the regions.

Mr. Blair

To correct the Minister — he is in an absolutist mood this morning — I said not that the Government are the only guarantee of social or regional policy but that one cannot assume—as the Government do — explicitly that the interests of the private sector always coincide with the broader interests of the public.

Mr. Maude

I have never suggested that that is the case. The principal consideration that may make the public interest diverge from the private interest of those involved is where competition is reduced as a result of a merger.

Mr. Blair

I shall restate this issue, specifically to highlight the differences between the parties. Are there circumstances in which the Minister can envisage his Department intervening in a merger or acquisition in which there are serious or adverse employment consequences?

Mr. Maude

In setting out our policy, we specifically made it clear that in certain circumstances we would take that view. I reassert that our basic position is that the usual criterion for reference is the effect of a proposed merger on competition. I make no apology for that, because I believe firmly that the best interests of the regions and of employment are promoted by free competition and by competitive businesses providing what customers want.

The hon. Member for Sedgefield mentioned reversing the burden of proof. This matter amplifies the hon. Gentleman's general theme that merger activity is intrinsically malign—that one should have to prove that a merger is good rather than assume that people taking decisions about whether to sell their shareholdings are best able to decide. I reject the hon. Gentleman's argument, because I believe that it should be our job not to put unnecessary hurdles in the way of mergers in which it cannot be said that there is a specific adverse public interest. I do not apologise for our proposal to leave the burden of proof where it lies.

Mr. Malcolm Bruce

Will the Minister acknowledge that shareholders are more than happy to go ahead with mergers that will give them a capital gain regardless of whether it is good for competition or whether the merger has been secured by telling people—such as those in Scotland involved in the Guinness case—a pack of lies, which they cheerfully accept that their new directors can repudiate? Is that not why we need an independent Government-backed agency to show that shareholders do not always act in the interests of the consumer or competition?

Mr. Maude

I was making the point—plainly, I was not making it clearly enough—that where the effect of a merger is to reduce competition we have no hesitation in using the Government agency, or the independent agency of the MMC, to examine the actual effects and, in proper cases, to prevent a merger taking place. It is precisely because we recognise that it may be in the private interests of shareholders to agree to a merger which reduces competition that the process of control must be retained and enhanced in the way that we suggest.

The hon. Member for Gordon quoted a passage in the Financial Times saying that we had concentrated too much on the speed of merger control procedures and not enough on the substance. Speed is of fundamental importance because the slower the procedures, the more difficult it is to use them effectively when they are needed. We believe that they are especially needed when competition is an issue.

Mr. Malcolm Bruce

To achieve that speeding up, will the Government consider strengthening the MMC, given the questions about its current dependence on part-time advisers?

Mr. Maude

In our Blue Paper we make a number of suggestions as to ways in which the working of the MMC can be enhanced. It does a thoroughly good job and represents a wide range of experienced people. I stress that it has full-time professional advisers. Members of the commission, however, are part-time. In our view, that is important because they should bring to the job of assessing the economic effects of monopolies and mergers their current day-to-day experience of what is happening in business and other areas. It is therefore important to retain that aspect. We also make suggestions for improvement to the processes of scrutiny of newspaper mergers. These are clearly set out in the Blue Paper but have not received any special mention today.

Having dealt briefly with mergers and restrictive trade practices, I shall deal perhaps even more briefly with the other main provision of competition law, covering monopolies and anti-competitive practices. We already have comprehensive powers to deal with behaviour by firms designed to exploit a monopoly position or to distort the market. Under the provisions of the Fair Trading Act, the Director General of Fair Trading can refer suspected monopoly situations to the MMC for investigation. If the MMC finds that there is a monopoly which has adverse effects on the public interest, undertakings can be accepted about the monopoly's future behaviour—backed up by order—making powers, including divestment of assets.

The Competition Act 1980 fills a gap in the previous legislation by enabling the Director General of Fair Trading to investigate anti-competitive practices by individual firms. If such practices are found and the parties are unwilling to give undertakings about future behaviour, the practices can be referred to the MMC for full investigation. Again, if the MMC finds the practices contrary to the public interest, there are order-making powers to deal with the situation. We do not intend to change the basic approach of the provisions, but we shall consider their operation in the light of the new restrictive trade practices legislation to see whether they can be made more effective.

My hon. Friend the Member for Darlington asked whether an order had ever been made to break up a monopoly, following an investigation. Powers are available to do that in all cases in which the MMC finds that a monopoly is contrary to the public interest, but such a step would plainly involve serious disruption and could be justified only in extreme cases for which no other effective remedy could be found. The MMC has never recommended divestment, no doubt for those reasons; and in the absence of such a recommendation from the MMC, Ministers would need to consider very carefully before deciding on such a course of action. I assure my hon. Friend that both we and the MMC are conscious that such powers do exist, and are prepared to contemplate their use in appropriate cases.

I am grateful to my hon. Friend for enabling me to issue what should be a salutary reminder to those who may be tempted to abuse monopoly power — that we have provisions to deal with such abuse which are as comprehensive and tough as we could wish, and which we are not afraid to use.

Monopolly references often attract less attention than mergers. Unlike merger references, they are not subject to any absolute time limit. A merger reference may be extended only once, by three months, whereas a monoply reference may be extended without a statutory limit, subject to the Secretary of State's approval. In the past, that difference has been reflected in the priorities of the MMC. Partly as a result of that, and partly because of the elaboration of procedures over the years, inquiries have, in general, taken two years and sometimes more.

I am glad to say that the trend to shorter time scales for merger reports is also being reflected in monopoly references, and that in recent cases nine months has been specified. That is a considerable advance for which the MMC deserves great credit, but I hope that, in due course, it will be possible to reduce that even further, perhaps to six months in many cases. However, more complex issues are bound to remain for which a longer time scale is essential if a comprehensive report is to be produced.

An important factor in achieving such reductions will be the timely submission of evidence to the commission. Often, the MMC has to wait months for evidence from parties who naturally have no interest in a speedy conclusion to the inquiry. Plainly, parties have the right to be heard. It is unreasonable, however, that monopolists who might be exploiting their customers may, by procrastinating, be able to put off the day of reckoning, and thus extend the exploitation.

The MMC has therefore started setting much stricter timetables for the receipt of evidence and documents from the main parties, and indeed all other parties. To hold parties to this stricter timetable, it may need to consider making use of its statutory powers to require the submission of evidence and documents. Parties will have to get used to keeping to this strict timetable. That is essential if reports are to be produced in the much shorter time scales to which I have referred.

Even among the general welcome that has been given to our proposals on mergers and restrictive trade practices, one or two cynics have suggested that our commitment to competition is all rhetoric, and will not be put into practice. The hon. Member for Sedgefield, although I do not like to say unkind things about him, was among those cynics. He said that it was all fine, tough talk, but where was the tough action?

I hope that I have shown the House how our belief in competition is reflected in our deeds as well as our words. With the improvements that I have outlined, United Kingdom competition law will he brought up to date, and we are determined that it will he used to the full to bring about, and to maintain, open and competitive markets. At the same time, the Government will continue to promote competition through their other policies, in all areas of the economy.

I have no doubt that, by continuing to promote competition and competitive businesses, we shall continue to see the spectacular economic growth that has put Britain, once again, at the top of the economic growth league table.

12.53 pm
Mr. Doug Hoyle (Warrington, North)

First, I congratulate the hon. Member for Darlington (Mr. Fallon) on providing us with this opportunity to debate competition policy. He must be becoming weary of Members offering their congratulations, but, having said that, I do not believe that he was in his usual sparkling form this morning. He was rather more muted than I thought he might have been—I do not know why—and he passed over certain areas very quickly.

When we talk about competition, I never understand why we do not consider agriculture. I accept that the hon. Gentleman mentioned it, but this Government, in common with all their predecessors, have carried on featherbedding farmers. The Prime Minister, as though she were an avenging dragon, regularly states what she will do at the EEC, how she will reform its budget and how she will get rid of the wasteful subsidies on food. She then comes back pretending that the team has won although they conceded so many own goals that matters remain as they were and we carry on propping up inefficient farmers.

In some future agriculture or competition debate, we should spend some time considering food and how to benefit consumers. When we refer to the EEC as a market for free competition we should realise that agriculture must be reformed. Reform would benefit tremendously consumers in this country and consumers throughout the EEC.

The hon. Member for Darlington could have referred to petrol retailers; my hon. Friend the Member for Sedgefield (Mr. Blair) referred to that in passing. The huge oil companies are using their monopoly to put a squeeze on the small independent retailers. In the end, the small independents will be squeezed out, and competition will be removed.

I am very worried about the fact that the Government are obsessed with competition and the free market. That obsession has led to short-termism and the lack of a long-term vision. If we pursue the Government's path without considering what could happen in the manufacturing and other sectors, I believe that the Government will create a society of ice-cream vendors and hamburger sales people. I do not know whether those are monopolies, but they appear to be two growth industries.

As we have examined competition this morning, no reference was made to what has happened to the manufacturing industry. The deficit on trade in goods rose to £10 billion last year. We are always hearing about the previous Labour Government, but in 1979 there was a surplus of £2 billion and import penetration was far less than it is now.

We cannot pursue the present path if we want manufacturing industry to exist in future. I have said frequently that there is no way in which manufacturing industry will ever employ as many people in future as it has in the past. Nevertheless, we need a strong manufacturing base as a wealth creator, particularly as the buttress of North sea oil, which the Government have had since they came to office, begins to run out. We must consider that point.

Equally, we are faring badly in relation to research and development as a result of short-termism. Yet research and development are the seedcorn. In comparison with other countries such as West Germany, Japan and the United States, we fare badly in that area. The Government should consider that point as well.

We should also consider training. We are not spending enough on training, nor are we training the right kind of people. Even with such high unemployment, there are still skill shortages, particularly in information technology and in the new technologies that will be important in the future. We should be training people to prepare them adequately for a changing society. We must look forward and prepare ourselves for the future. We are falling behind other countries in that respect.

I do not believe that privatisation has been a success. No one can pretend that we receive a better service from British Telecom because it has been privatised, or that British Gas is more responsive. The consumer organisations looking after those industries should have more teeth. The Minister did not refer to that. He said only that British Gas was receiving fewer complaints than before. Perhaps people are fed up with complaining, particularly about British Telecom. The same applies to——

Mr. Maude

The hon. Gentleman has talked about competition in the gas and telecommunications industries. When the Bills privatising those industries went through Parliament, did he press for them to be broken up into smaller units?

Mr. Hoyle

I pressed for them to be kept in public ownership—[HON. MEMBERS: "Monopolies!"] They were, but they were more responsive in the public sector. Now that they are private monopolies, those who look after consumer interests should have more teeth — more powers.

The hon. Member for Darlington talked about energy and the privatisation of electricity. I hope he will see to it that the consumers' interest is better represented in that area than it is in relation to gas now. The Government have failed on that point. They pay lip service to consumers, but rely, in this as in so many other things, on the workings of the free market — and that is the problem.

Mergers and takeovers have been the growth industry of recent years. The Government have been extremely complacent about the boom in takeovers, as though, if the free market is allowed to work, benefits will flow to consumers, people employed in industries and the nation. All that is asked of the economy is competition.

There may be a difference of opinion between the Minister and Sir Gordon Borrie, the Director General of Fair Trading, who said: Although I hold strongly to the view that competition should be the main consideration in merger policy and that references to the MMC should therefore usually be in cases where competition would significantly be damaged … I certainly do not take the view that where competition is not affected everything can be left to 'market forces'. I do not have the complete faith in the 'invisible hand' of Adam Smith as the regulator of our economic and social affairs. I often ask who it is who drives these market forces and the answer—shareholders, institutional or otherwise, and a myriad of financial advisers and experts—does not encourage me to believe that their decisions whether to buy or sell particular shares at a particular price will necessarily bring about the most efficient deployment and development of the assets which those shares represent. If this is heresy to those who believe in efficient financial markets, then I stand a heretic—or at least a sceptic. The Director General is right. One cannot leave it to the free market economy always to bring about the desired results.

The hon. Member for Gordon (Mr. Bruce) referred to Pilkington. It is a regional company, based in the northwest, and highly successful. It is one of our few world leaders, being the world leader in flat glass. It achieved that position because it was prepared to invest money in the company rather than paying it out to shareholders. It invested in new machinery and the modernisation of its plant. Every year, it puts a large proportion of profits back into research and development. Then it found itself faced with a takeover bid from BTR Industries, which is an asset-stripper. One of the first things that BTR would have done, was cut research and development.

The Government were quite prepared to leave it to the free market. The takeover was avoided only because of a concerted campaign in the north-west, particularly by the local council and by the employees of the company. At that stage BTR withdrew.

Mr. John Marshall

Does the hon. Gentleman not agree that BTR gave way because Pilkington's institutional shareholders made it clear that they would not accept the bid?

Mr. Hoyle

Pilkington's shareholders were roused by the outcry about what would happen if that successful company was taken over. They came to life only at the last minute. The company could easily have been taken over, and we would have seen the break-up of one of our few world leaders.

I shall now turn to a matter, which may give the hon. Member for Hendon, South (Mr. Marshall) another chance to speak about the institutional shareholders. A more recent takover involved Birmid Qualcast. That involved companies in the north-west and a large company in Warrington. The hon. Member for Warrington, South (Mr. Butler) is in the Chamber and it is in his constituency that the New World company is situated. By the narrowest of margins, Birmid Qualcast avoided being taken over by a large cement company that may or may not have had the expertise to run it.

Birmid Qualcast did what the Government had urged companies to do—it diversified from foundries and built up a high reputation for consumer durables. It took on foreign competition and defeated it. New World gas cookers are made in Warrington and employ some of my constituents and some of the constituents of the hon. Member for Warrington, South. It reorganised and is now a leader in its field. That company could have been taken over. Would that have been of benefit to the nation?

In looking at such matters, we must consider not only free competition but the national interest. The hon. Member for Gordon spoke about the takeover of Guinness by Distillers. All the promises that were given then were broken. Promises were given that the head office of the company would be in Scotland and that someone from Scotland would be the chairman of the board. Those promises were broken and we had the unsavoury spectacle of what happened in relation to that takeover bid and of people appearing in court. They made very easy pickings from the takeover. There is something wrong in allowing mergers that are so structured to go forward.

My hon. Friend the Member for Sedgefield was quite right when he said that in looking at mergers we ought to take into account the consequences for employment. We should take note of the views of those who work in the companies. If we can take into account the views of shareholders, large institutions and pension funds, why should we not take account of the views of those who produce the wealth of the company? Many employees give a lifetime to a company and can be faced with a takeover that can suddenly lead to them being thrown out of work, particularly if an asset stripper moves in. All the work of those people comes to naught and they and their families are put out of work.

There ought to be a provision that, in takeover bids, the views of the employees should be heard, and it should be explained to them what their future will be if the takeover goes ahead. We cannot rely only on competition to represent the interests of the consumer or the employee. As my hon. Friend the Member for Ashfield (Mr. Haynes) said when discussing the mining industry, many consequences flow from paying attention only to competition. There are consequences for the regions, and things cannot be left to market forces.

It is thought that, if we allow free competition, companies will come to the regions, but they will not. With the opening of the Channel tunnel more and more companies will be dragged further south. That will lead to impoverishment of the regions. I know that there is a debate to follow this one and I do not want to take up too much time debating the north-west. I found it difficult to decide in which debate to participate. I want the views of the north-west to be heard shortly.

We are not simply concerned with a free market, but with the quality of life of our people. It is a matter of the life and vitality of the regions and of bringing hope and vision. It is about preparing for the future. We are relying on short-termism and allowing mergers to proceed. Unlike other countries, we are neglecting the industries of the future. We are not spending enough money on research and development in the public and private sectors. When we remove the amount that we spend on defence from the total amount that we spend on research and development, we compare badly with many other countries.

We are cutting education and training. We are not preparing for the future by training the highly qualified and professional force that we need if we are to compete in the world markets and in Europe. We cannot compete if we look to the short term rather than the long term. The Government are concerned with the short term, and prosperity. They are not locking far enough ahead to have a vision of what tomorrow will be like. North sea oil is running out and I fear that the consequences of the Government's short-termism and their reliance on the free market will cost the British people dear in the future.

1.11 pm
Mr John Marshall (Hendon, South)

I should like first to congratulate my hon. Friend the Member for Darlington (Mr. Fallon) on his success in the ballot and on choosing this subject. Several hon. Members wish to speak in this and the following debate, so I shall be brief.

I listened with interest when the hon. Member for Warrington, North (Mr. Hoyle) said that the Government were obsessed with short-term economic thinking, competition and the free market. Those factors have led to the longest period of sustained economic growth since the war, and to a faster growth in employment in the United Kingdom than in any other European Community country since 1983.

Mr. Hoyle

Will the hon. Gentleman give way?

Mr. Marshall

No, I shall not give way, as the hon. Gentleman spoke at some length. He emphasised the need to go on to the debate about the north-west. I shall ration myself to a 10-minute speech and hope that other hon. Members will do so too.

The hon. Gentleman and other hon. Members referred to the impact of privatisation on competition. When the hon. Gentleman suggested that he should prefer British Telecom to be in the public sector, he is saying that a public monopoly would be better than competition between two private suppliers of telephone services. I do not believe him, and the British people will not believe him either.

The competition from Mercury will do a great deal to improve the standards set out by British Telecom. British Telecom, British Gas and, in future, the electricity industry will be subject to much more rigorous pricing rules than apply to any nationalised industry. They are subject to a statutory rule that the rate of increase of their prices must be less than the rate of inflation. When have any Government imposed a similar obligation on a nationalised industry? The answer is never.

I accept that the transfer from the public to the private sector does not change overnight the ethos of these companies. Those who have been cocooned for generations in the subsidies and the protectionism of the public sector take time to react to the more competitive environment that they find in the private sector. But they will react, and the service to the consumer will be very much better.

I congratulate the Government on the success of their competition policy. My hon. Friend the Minister did riot, however, refer to the Building Societies Act 1986, which has led to greater competition between banks and building societies. The banks now open on Saturdays, a practice that they had discontinued for many years. In my constituency one can even find a bank open on Sunday.

When people speak about big bang, they talk as though it were a bonanza for the stock exchange. However, big bang created a stock exchange that is internationally competitive. My hon. Friend the Member for Harrow, East (Mr. Dykes) and I have an interest to declare. We are members of the international stock exchange. The stock exchange is now a much more efficient collector of taxes for the Government. It operates a service that is cheap to the consumer. No international restraint is placed upon it. It is much easier for firms to set up in London than it is in Japan and elsewhere. The London stock exchange welcomes international investment. Its service to the consumer is first-rate. The amount of money going to the Government in stamp duty on many institutional contracts is twice the amount of commission that goes to the stockbrokers.

As for the Government's attitude to monopolies and mergers and restrictive practices, historically we have always been very successful in controlling restrictive practices, but we have been slightly less successful in dealing with monopolies and mergers. Indeed, if my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) were here, we could congratulate him on his 1964 Act. It was one of the most successful measures that has ever been introduced for controlling restrictive practices. I am proud that it was a Conservative Government who legislated on restrictive practices. It was also a Conservative Government who legislated on restrictive trade practices under Lord Thorneycroft in the 1950s.

The work of the Monopolies and Mergers Commission has not been completely successful. On a number of occasions, the results of the commission's inquiries have been anything but perfect. On one occasion the commission inquired into a highly geared bid—that by Elders for Allied Lyons. Its advice to the Government was that the bid was all right because the banks were willing to provide the money: that if the banks were willing to accept the high level of gearing, it was acceptable to the commission.

Those who remember the events of 1973, 1974 and 1975 will not accept the view that, because the banks are willing to do something, it ought to be acceptable to the country at large. All too often, banks are carried away by their enthusiasm for a project and lend more money than is warranted. My concern about highly geared bids is that companies will be set up and borrow so much that they then refuse to invest as they should in capital expenditure and product innovation.

The Government say in their document that the chief reason for referring mergers to the Monopolies and Mergers Commission is competition. I accept that view, but we must look beyond such bids to the wider public interest and to what some people call Hansonisation, under which companies are taken over, a short-term approach then being adopted by the predator. If companies are taken over in that way, their future development programmes are forgotten.

Since 1979, the economy has been very successful. There is no doubt that the major reason for that is the willingness of the Government to take on the vested interests of privilege throughout the economy.

I congratulate my hon. Friend the Member for Darlington on selecting the subject for debate, and the Government on the steps that they have already taken. I wish them well for the steps that they will continue to take. In tackling the privileges of the professions and others, they are fighting for the whole nation, and will ensure the future prosperity of all the people. They will also ensure that the consumer gets a fair deal from the economy at large.

1.19 pm
Mr. James Arbuthnot (Wanstead and Woodford)

I should like to consider two aspects of competition policy. The first arises out of my experience as a local councillor, and the second out of my experience as a barrister practising at the Chancery Bar.

Before I came to the House, I was a councillor in the royal borough of Kensington and Chelsea. I was chairman of the works committee, which is in charge of rubbish collection. It is not a romantic job, but someone has to do it, and for some reason it had to be me. I should like to tell the House the story of the rubbish collections in Kensington and Chelsea.

For many years, the borough was divided into two parts—what could loosely be described as old Chelsea, and the rest Kensington. The dustmen covering the two areas belonged to two different unions, and had two completely different sets of working practices. In old Chelsea—if I may put it bluntly—they were terrible. In Kensington, they were rather better.

Then the Government came to power. Managers were encouraged to manage. People were encouraged to think, for the first time for decades, of working in a spirit of enterprise and competition.

In old Chelsea, we were receiving complaints about the dustmen. They were not just from the public, although we were getting 40 of those a week; we were also receiving complaints from the dustmen's wives. They said that their husbands were getting home from work too early. They were not getting home at about 4 pm, when most dustmen tend to get home; or at 2 pm; or at midday. They were getting home before their children went out to school in the mornings. Most of them had second jobs. Many had third jobs, and one was on the dole as well.

We did a study, and were advised that the rubbish being collected with 12 dustcarts in old Chelsea could be collected with six. We told the old Chelsea dustmen that that was going to happen. They were not happy. They said that, if we insisted, they would go on strike. We did, and they did. We made the lot redundant, and brought in Grand Metropolitan. What had been collected with 12 dustcarts was collected by Grand Metropolitan, not with 12, or with six, but with three, for half the price. The complaints were down from 40 a week to four a week.

That came about only because of the new wind of competition and enterprise introduced by the present Government, which for the first time encouraged local authorities to go out to private tender. But that is only half the story. Having achieved that success with old Chelsea, we then turned our eyes towards Kensington.

I remind the House that the Kensington dustmen were the good guys, without the restrictive practices of old Chelsea. Before we had time to go out to tender, the Kensington dustmen came to us. They said, "We will do the job that we were doing before, but we will do it better. It will cost you £1 million a year less, you will have fewer dustmen, and you will pay them a little more." We accepted the offer. The savings of £1 million brought in a further £3 million of Government block grant, a total of £4 million, which is what the entire dustbin collection service was costing us in the first place. I like to think of Kensington and Chelsea having an entirely free refuse collecting service.

Now, a direct labour force does the work in the north of the borough of Kensington and Chelsea, while a contractor does it in the south. Whenever the contractor says, "We want to increase the price", the council can say, "But the direct labour force is longing to take it over." As a result, the contractor has been known to put the price not up, but down. Whenever the direct labour force says that it wants to increase its pay or bring in some new demarcation, it is possible to say that the contractors are longing to take over the job. That is pure competition. We were accused of playing one side off against the other and, with no shame at all, we admitted that we were entirely guilty, and what benefits that has brought to the ratepayers, dustmen and residents of Kensington and Chelsea.

The second area to which I wish to refer relates to my experience as a barrister. I welcome the Green paper on restrictive trade practices. As a practising barrister, for me to argue that the Bar should be exempt from the new wind of competition would be special pleading. In any event, I have no wish to do so because if the Bar cannot survive competition, it does not deserve protection.

There are certainly restrictive practices indulged in by the Bar which certainly ought to go. For example, it is unjustifiable to insist that only those with university degrees should be allowed to go to the Bar. Some of the best barristers in the country have no degree and I suggest that that ought to be allowed to continue. Another restrictive practice is the imposition by the powers that be of a certain method of charging fees.

Fees, under the present regime, have to be the same whether the barrister wins or loses the case. The contingency fee basis, whereby a barrister bases all or part of his fee on the percentage of the amount, if any, that is won in litigation is illegal. It is all right in America, but it is illegal here. The reason is said to be that a barrister would have too close a personal interest in the outcome of a case and that, as a result, he might mislead the court for motives of personal gain. In passing, I should say that it does not seem to have that effect in the United States. It seems rather odd that our barristers might be considered more likely to mislead the court than American barristers.

That matter should be thrown open to the cleansing winds of competition and freedom. My reason for saying that is that the legal aid scheme is not now working very well. Many people, possibly most people, come just above the limit for legal aid. The effect of that is that British justice is denied to them. The only people who can at present make use of the legal system in this country are the very rich or the very poor and that must be wrong.

The answer cannot be to pour taxpayers' money into the legal aid fund, because the Government have not achieved the thriving economy that we now enjoy by giving in to every demand for taxpayers' money as it arises. The answer must be to release the money that is already available, namely the funds in dispute in the case itself. The litigant, who is now prevented by cost from going to law, is also prohibited from going to a barrister and saying, "If we lose you get nothing but if we win you get a third, a quarter or whatever of the amount we win." Why is he prohibited? With the contingency fee basis both he and the barrister are potentially better off and the case is properly tested in court. However, without it they both lose and perhaps the potential defendant has been unjustly enriched.

As my hon. Friend the Member for Darlington (Mr. Fallon) said, there is a balance to be struck. For example, there is an area of concern where a relatively uneducated person goes to a lawyer and is advised, perhaps wrongly, by that lawyer that his chances of success are low so that the lawyer could take on the case only for a high percentage of the money at stake. There needs to be protection against that potential abuse. However, to say that that is a reason for making the contingency fee basis illegal is to throw out the baby with the bath water.

I welcome the Green Paper on restrictive trade practices, in particular in 30 far as it applies to my profession. Are we barristers so timorous that we are unable to compete with any competition that might arise? I hardly think so. We are well able to look after ourselves, and those that are not should leave the Bar. The only protections that should remain are those that protect not the profession but the public. Some of the present practices are not in the public interest.

1.30 pm
Mr. Hugh Dykes (Harrow, East)

I am grateful for the remarks of my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) and particularly his last point, which shows, above all, the great seriousness of the Government in inculcating a new policy of competition and how bad it would have looked had competition applied to industry but not to the professions. The Government are to be congratulated on that.

I apologise to Hansard for speaking so fast, but I have to get in five quick points. I have to fulfil a moral obligation to you, Madam Deputy Speaker, by being very brief to allow other hon. Members to speak. I congratulate my hon. Friend the Member for Darlington (Mr. Fallon) on launching this debate. We are campaigners in the cause of Europe Together. He rightly referred to the exigencies of European competition, arid I utterly agree with him. I hope that the Government will allow their competition policy to fuse with and merge into a Europewide competition policy in future, particularly when the internal market begins, with, to some extent the Government acting as an agent, as they do for imports policy, with the Commission taking the lead on foreign trade.

None the less, the Government have put their own inputs into this matter because they have honed up their own competition policy in the first place. I know that my hon. Friend the Minister has already spoken, but I hope that, in future, Government spokesmen will take on board the vital need to get a national and Europewide trade marks policy and origin marks policy right. I regard any compulsion for trademarks to be used as a restraint on trade as does the European court. Therefore, I hope that the Government will accept the idea of an EECwide trade mark and origin mark, and not necessarily for that to be compulsory, although that would not be reprehensible in the same way. National trade marks would limit trade if they were compulsory; therefore, they should be voluntary but not deprive the consumer of the chance of knowing the origin of a product or where it has been produced. They should have that legal right.

I look forward to the internal market for all sorts of reasons which I do not have time to describe, but one of the key reasons is the abolition of the scandal of duty-free trade. This is one great scandal where, to use the economists' jargon, "supernormal profits" are made on ferry boats and at airports. I believe that duty-free should be completely abolished in 1992 in favour of a genuine Europe-wide market. The Government must be aware of the enormous campaign whereby all the vested interests will argue that duty-free trade should be retained for alcoholic drinks, tobacco and so on. I hope that the Government and other member states will be robust in resisting those blandishments.

Like other hon. Members, I feel that there has to be a balance, and I warmly congratulate the Government on emphasising the primacy of competition policy which will open up all sorts of fields to new competition. My hon. Friend the Member for Darlington mentioned France. I have to reply with that wise utterance by Voltaire in "Candide": Superstition sets the world in flames; philosophy quenches them. Although the main motive of privatisation has been to create a new private army of shareholders, which I am, of course, very enthusiastic about, the other reasons, such as increasing competition and consumer service, are emphasised. However, in reality, they are less likely to be apparent; therefore the Government have to be vigilant. As I said two weeks ago, I would have hesitated before privatising the electricity industry in the form that has been announced. Although in France there is enthusiasm for privatisation, the current Government in Paris knows when to stop and when to exercise restraint.

My hon. Friend the Member for Hendon, South (Mr. Marshall) mentioned the stock exchange. I agree with him although there are aspects of the big bang which were adverse to the customer, which I would describe if I had time. Another interest of mine is as a non-executive director within Dixon's Group plc. Although I did not hear his remarks, I believe that my hon. Friend said something about competition between its segments. There is ferocious competition between Curry's and Dixon's, as there is between other retailers.

Those connected with retailing in Britain can be justly proud of the efficiency of British retailers, which has been an object lesson to many manufacturers. With both domestic products and imports the increased power of retailers to purchase on a larger scale has enabled the consumer to be well served in terms of low prices and quality, and I hope that that will continue.

I warmly support the direction of Government policy and look forward to the continuation of their review of competition policy. None the less, I hope that the Government will be aware of other considerations. Sometimes, even a quasi-monopoly can help the customer, but it depends on each case. If only time allowed, I could go into the many examples. We have seen that the Government have a comprehensive policy. Labour has none, as was shown by the long-winded clichés of the hon. Member for Warrington, North (Mr. Hoyle).

1.34 pm
Mr. Rogert G. Hughes (Harrow, West)

I am grateful to my neighbour and hon. Friend the Member for Harrow, East (Mr. Dykes) for speaking so quickly and briefly to allow the second debate to start.

In congratulating my hon. Friend the Member for Darlington (Mr. Fallon) on introducing the debate, I well remember, during what might be called his dress rehearsal for taking his seat as hon. Member for Darlington, the stark comparison between him and the alliance candidate. By showing the clarity of his political vision, my hon. Friend did a great service to his party and to the nation. Once again, after the formation of the new party, the Social and Liberal Democrats, my hon. Friend has done that service. I recommend that people read my hon. Friend's comments and compare them with the balanced speech made by the hon. Member for Gordon (Mr. Bruce). I say "balanced" because the hon. Gentleman seems to take both sides of the argument and to reach no particular conclusion on policies. There was no policy content in his speech.

I shall restrict my comments to one matter on which the debate has hardly touched — the health services. We must not be frightened of talking about competition in the health services. As a number of hon. Members have graphically illustrated, competition has worked to the advantage of the consumer in many directions. A monopoly results in queues, and that is a familiar story for the National Health Service under any Government. A monopoly results in restriction of choice, as has happened in the NHS. We are always told that there must be limits on competition and that sometimes a monopoly works to our advantage. Those who are for a monopoly must prove why it works to the nation's advantage. The health services are too important not to allow the market to operate, and the provision of spectacles provides proof.

Before I became an hon. Member, and before there was deregulation in the provision of spectacles, the Opposition and the industry made a great deal of fuss. There were scare stories about people not being able to afford glasses and being charged a fortune for eye tests. Those arguments are repeated now that there will be, in theory, a charge for eye tests. I believe that the competition which already exists will lead to the major manufacturers and those who are slugging it out in the marketplace giving free eye tests and that people will be more likely to go to a professional to find out whether there is anything wrong with their eyes or whether they have any of the other diseases that can be discovered following an ophthalmic test.

Last November's White Paper on primary health care promised an increase in the proportion of the doctors' remuneration represented by capitation fees, promised to give consumers more information about doctors and services so that they could make an informed choice, and said that restraints on advertising might be removed. I do not want to hear that advertising restraints may be removed. I want to hear that they will be removed.

There are huge discrepancies between the quality of primary health care in different parts of my constituency. Some surgeries and group practices provide many services such as minor operations and what some of them call MOT tests — a form of preventive medicine. Those surgeries employ nurses, and send people out on call at any time of night without employing locums. They provide a variety of services that should attract anyone to register with their doctors. In other parts of my constituency, there are general practitioners who simply do not come up to standard. Their record on visiting patients in an emergency is not good.

In reality people have no choice. They cannot choose between a general practitioner providing the range of services that I described and a general practitioner whose services are restricted, because the family practitioner committee restricts the number of people who can set themselves up as GPs. Just the other night, the Harold Macmillan health centre in West Harrow was opened. I am proud to have in my constituency a health centre named after that distinguished former Prime Minister.

That health centre is run by a group of doctors who provide excellent services. They provide a surgery which is a pleasure to visit, with new magazines—that makes a change from most doctors' surgeries—brightly lit rooms and good facilities. The doctors are also providing their patients with a prospectus to ensure that they know what the surgery can provide.

I want those benefits to spread; I want to see them everywhere. I firmly believe that if we have competition between general practitioners—if they tell their patients what they can provide—the market will come up with more general practitioners and good quality practices. In health, as in so many other activities, competition can provide a better service for the people of this country.

1.41 pm
Mr. Fallon

I thank my hon. Friends who have participated in the debate, as well as Opposition Members, not forgetting the hon. Member for Ashfield, (Mr. Haynes). We have had a wide-ranging debate and between us I think that we have covered all aspects of competition policy. To safeguard the time remaining to my hon. Friend the Member for Cheadle (Mr. Day), I shall not reply to the indvidual points made—nor will undertake to write to my hon. Friends. But all of us interested in competition policy will study carefully what has been said in this important and interesting debate.

Question put and agreed to.

Resolved, That this House recognises the part which competition policy plays in fostering choice, reducing prices and stimulating wealth creation.

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