Lord Hunt, who chairs the Press Complaints Commission (PCC) and is responsible for creating its successor, the Independent Press Standards Organisation (IPSO), recently appeared before the Culture Media and Sport Select Committee. It did not go well for him.MPs challenged him again and again – on his £180,000 pay packet, on his duff statistics, on his remarkable misreading of the Leveson Report – but one claim made by Lord Hunt slipped by almost unnoticed.In his opening remarks he declared:

"IPSO has now been established as a Community Interest Company. IPSO will therefore be subject to independent, external scrutiny through the regulator of community interest companies."

He went on to explain, in a somewhat rambling way, what it means to be a Community Interest Company (CIC), as he saw it:

"It means that this new body has to act in the public interest and if you look at the powers of the Regulator of Community Interest Companies you will see that this new body (and I’m not quite sure some of those who’ve signed up to the contract realise this) and of course it would only be if this new body worked and behaved in a way that subjected it to complaint – it is perfectly possible for the regulator to step in and dismiss the board and create a new board."

These remarks are full of irony and rest on a number of false premises. Once again, the people promoting IPSO appear to be trying to pull the wool over our eyes.The irony is that Lord Hunt and his industry backers should boast that IPSO will be ‘subject to independent, external scrutiny’ when that is precisely what they are aiming to avoid by refusing to comply with the Leveson-based Royal Charter. (Normally they argue that there is no need for such scrutiny because they can regulate themselves perfectly well thank you.)It is doubly ironic because the person who is supposed to apply this external scrutiny, the Regulator of CICs, is appointed by a politician. Indeed, she is appointed by that self-described scourge of Rupert Murdoch, the Business Secretary, Vince Cable.Lord Hunt and his friends at the Murdoch papers, the Mail and the Telegraph must have forgotten that they claim to be opposed to political meddling in the press – though it is easy to see how Lord Hunt could become muddled as he tries to combine running the PCC with his party-political work in the House of Lords. (In fact it is the Royal Charter that will effectively keep politicians out: among other things, it would not allow Lord Hunt to chair a self-regulator.)But enough of irony, let us examine the holes and false premises in Lord Hunt’s claims about CIC companies.Does CIC status really mean that IPSO will operate in the public interest? NoThe IPSO application for CIC status (which they have not published) states:

"We/I, the undersigned, declare that the company will carry on its activities for the benefit of the community, or a section of the community.”

It is signed by the two party-political peers and the Mail editor who constitute the company.They can’t mean that IPSO will serve the whole community because they have conducted no consultation with the public, and the polls show most people will not trust IPSO. Moreover the community’s elected representatives in Parliament have made it overwhelmingly clear that they do not favour this form of regulation.So the signatories must mean that IPSO will serve ‘a section of the community’, and the only plausible community in whose benefit it will operate is the big newspaper companies operated by Rupert Murdoch, Paul Dacre and their friends and puppets.Surely, you ask, the CIC people would not let them away with that? Wrong. In the application process no one, either at the Regulator’s office or at Companies House, looks behind the claims of community interest that are made. The claims are not tested.The PCC-IPSO application goes on to say:

"The community will benefit by the existence of and access to a regulator that promotes and upholds the highest professional standards of journalism, but having regard at all times to the importance in a democratic society of freedom of expression and the public's right to know."

It then lists various ways in which it will supposedly do these things, but without acknowledging that in every significant respect IPSO falls short of the standards put forward by Lord Justice Leveson after his year-long public inquiry, and subsequently adopted by Parliament in the form of the Royal Charter. Read more about this hereIPSO instead is a simple remodelling of the PCC, of which the judge said damningly: "It is difficult to avoid the conclusion that the self-regulatory system was run for the benefit of the press not of the public."So CIC status simply cannot be held up as proof that IPSO acts in the interest of the public.Will the CIC Regulator exert powers to ensure that IPSO does a good job for the public? No.Lord Hunt suggested that if IPSO "worked and behaved in a way that subjected it to complaint" it was "perfectly possible for the Regulator to step in and dismiss the board and create a new board."In saying this Lord Hunt seeks to reassure the public that IPSO, in its supposed role as a self-regulator, is subject to effective external scrutiny thanks to CIC status. This is not the case.In reality the CIC Regulator can intervene in a company’s affairs only in pretty extreme circumstances. The rules of her office [pdf] stress for example that "launching a formal investigation is itself a serious step" and "the Regulator’s power to investigate will only be used on rare occasions."Triggers for action can be criminality, serious financial mismanagement or serious misconduct by directors. On this basis the CIC Regulator would not have been able to do a thing about the PCC, even though, as the Prime Minister and Lord Justice Leveson pointed out, it scandalously failed the public.There is a fourth category too – "a pattern of conduct involving deliberately misleading or deceiving customers or creditors". Since IPSO, with all its faults and deceptions, has already satisfied the CIC entry test, we need not expect any future action there.Nor is Lord Hunt being correct when he says that the CIC Regulator could replace the IPSO board in the event of complaints. The Companies (Audit Investigations and Community Enterprise) Act of 2004 makes clear that she can only 'exercise her supervisory powers’ in this way in the event of misconduct or mismanagement in the administration of the company, or a need to protect the company's property.To sum up, Lord Hunt is employing the CIC Regulator as a kind of fig leaf of respectability for IPSO, but his fig leaf is a see-through one.