My Lords, I thank the noble Baroness, Lady Hayter, for her amendments, which propose changes to Schedule 4. The Government are committed to increasing transparency and accountability in the public appointments process.
The amendment seeks to make it a statutory requirement for the appointment of the chair of the CMA to be approved by a Select Committee of Parliament. There is already a system in place, introduced by the previous Administration, for agreeing between Parliament and the Executive which of the Government’s public appointments will be subject to a pre-appointment scrutiny hearing. Under this system, the Secretary of State discusses and agrees with the chairman of the relevant Select Committee which appointments will have such a hearing. The Cabinet Office publishes a list of these appointments, most recently in August 2009.
The Government, in their response to the Liaison Committee’s report on Select Committees and public appointments, encouraged Ministers to engage with Select Committee chairs to ensure that the right appointments are receiving Select Committee scrutiny prior to appointment. The current system works well and the Government do not believe that there is any advantage in formalising this process in legislation in respect of individual roles such as that of the chair of the CMA. Indeed, under the current system, a pre-appointment hearing process is already in place for the chairs of the Competition Commission and the OFT.
Amendment 24AB seeks to make it a statutory requirement for the Secretary of State, in appointing the chair of the CMA, to be satisfied that that person has demonstrated an understanding of the impact on consumers of competition and its absence, particularly on vulnerable consumers, as well as of relevant experience in wholesale and retail markets. The appointment of the chair of the CMA is regulated by a code through the Commissioner for Public Appointments, which clearly states that ultimate responsibility for public appointments rests with Ministers. As such, the Secretary of State has been involved in the appointment process for the CMA chair-designate from the beginning and has agreed the selection process and criteria. The published person specification for the CMA chair-designate appointment made clear that knowledge of competition and consumer policy issues, and their implications, was a key requirement.
As noble Lords are aware, at the conclusion of the appointment process, the noble Lord, Lord Currie of Marylebone, was appointed as the chair-designate to the CMA. I am pleased to note that he is in his place. His formal appointment, assuming that the present
Bill receives Royal Assent, will entail a pre-appointment hearing by the BIS parliamentary Select Committee. I am sure that noble Lords will agree that since his appointment as CMA chair-designate, the noble Lord has amply demonstrated his knowledge and understanding of the impact of competition and the effects of its absence on consumers.
I agree that it is important that any candidate for the CMA chair role demonstrates their knowledge of competition and consumer policy, as well as relevant experience in wholesale retail markets. However, formalising in legislation that the Secretary of State must be satisfied as to a candidate’s understanding of these issues is unnecessary in practice. It would also give unbalanced prominence in statute to these, albeit important, areas at the expense of other, equally important areas of understanding or qualities that any candidate for the CMA chair role should be able to demonstrate. For this reason, we do not think it necessary or appropriate for there to be such a statutory requirement.
Finally, Amendment 24BB concerns the pay structures of the CMA. Fair pay in the public sector is evidently more essential than ever in the current climate, as is openness of public bodies in their mandates and resource allocation. In light of this, the Government have implemented a number of measures to support recommendations made in Will Hutton’s report on fair pay in the public sector. For example, public bodies are required to publish in the remuneration reports of their annual resource accounts the pay multiple or ratio between the total remuneration of the highest-paid director and the median total remuneration of the staff excluding the highest-paid director. Public bodies, including the OFT and the Competition Commission, are also required to publish pay details, including names, of their most senior civil servants with a salary of more than £150,000. We do not, however, agree with placing a ban on managers earning more than 20 times the pay of the lowest-paid full-time employee in their organisation, as suggested in proposed new sub-paragraph (4) of this amendment. This was rejected by the Hutton review of fair pay in the public sector.
In light of this, we do not consider that a specific statutory requirement is needed for the CMA to ensure fair pay. We also disagree with the part of the amendment that apparently seeks to require that all CMA members appointed for more than three months be in the direct employment of the CMA. It is quite right that the staff of the CMA who are in full-time employment should not be employed through personal service companies, or similar, and therefore be able to avoid paying full national insurance contributions. However, the membership of the CMA will include both non-executive directors and independent panel members. Both of these types of member are needed to bring external expertise to the management of the CMA or particular inquiries. It is an accepted principle of good corporate governance that non-executive directors should scrutinise the performance of the executive management while providing them with external advice, support and scrutiny. I therefore ask the noble Lords to withdraw these amendments.