Estate Agents Bill
Order for Second Reading read.
I beg to move, That the Bill be now read a Second time.I ought to begin with two formalities. First, I declare an interest as a solicitor and a house owner likely to come into contact with estate agents. Secondly, if I catch your eye towards the end of the debate, Mr. Speaker, I shall ask leave to speak again on matters that may be raised in the debate.
The hon. Gentleman realises that it is not I who will give him permission, but the House.
And, of course, with the leave of the House, Mr. Speaker.This Bill is one the nature of which has come before the House for the past 90 years. There have been many attempts to legislate about estate agents. Every one has been by way of a Private Member's Bill. The first was as long ago as 1888. The last Bill was introduced in the previous Session by my hon. Friend the Member for Enfield, North (Mr. Davies). This Bill follows almost completely the substance of my hon. Friend's attempt. There are changes in the form of the Bill which have been made in the light of discussions with leading estate agents' organisations and which take account of many of the comments made both on Second Reading of that Private Member's Bill and in Committee. 1 shall refer briefly to some of them. For instance, there are the definition of residential accommodation, the exemption for receivers, special provision for partners, which I shall explain in more detail if I am asked to do so, and matters relating to reports by accountants. There is one other significant change from the Bill presented by my hon. Friend. The regulation of estate agents in Scotland is defined by this Bill as a devolved matter. I believe that that follows the devolution settlement. It goes without saying that every previous Bill on the subject has been unsuccessful. The consumer has looked in vain to this House for protection against the loss of his deposit. History is being made in that this is the first Government measure to deal with a long-held grievance, namely, that a house purchaser, in perhaps the most important transaction of his life, enjoys no statutory protection against the loss of his deposit. It is a grievance that is prospectively shared by more than half the families in the country. With this Bill, the consumer will be afforded a long-overdue protection, to which he has a right. In tribute to the estate agency profession, I should add that the Bill has the overwhelming support of estate agents' bodies as well as consumers. I believe also that it codifies the long-standing good practices of many estate agents. I have been extremely grateful for the cooperative and constructive spirit in which we have been able to have discussions with estate agents' organisations about these legislative proposals. The purchase of a house is without doubt the most important and costly, and perhaps the most anxious, transaction in which the consumer is ever involved. The house purchaser is entitled to be assured that money entrusted to an estate agent is protected and secured. The purchaser is entitled to expect an acceptable standard of competence from the estate agent. He is entitled to complete openness in all dealings between the agent and the client. He is entitled to expect that the unscrupulous minority of rogue agents who bring a bad name to the eminently respectable majority should not be permitted to practise. Those are the expectations that the Bill hopes to fulfil. The Bill is concerned only with the buying and selling of residential property. Industrial and commercial transactions are excluded. Those buying in that area of activity—often large companies or corporations—are sufficiently well advised and more than capable of looking after their own interests. The Bill avoids registration or licensing. Indeed, it creates a precedent. No attempt is made to seek the regulation of estate agents through the extension of a licensing system. There is no creation of a bureaucracy of control involving compulsory registration or licensing, which I believe is neither necessary nor desirable to achieve the measure of protection required by the general public. Under the Bill, the substantial majority of estate agents who deal fairly and properly with their clients will be able to continue to practise without fear or re striction. The Bill will operate only against the unscrupulous minority of rogues and malpractitioners, the fraudulent, or the dishonest. Unfair and dishonest practices may be proscribed by regulations. Those who are unable adequately to reimburse their clients for loss of money entrusted to them will not be permitted to take money. Estate agents will have to declare to their clients the clients' liability for any prospective charges, and will also have to declare to the other party involved any personal interest they may have in any transaction. At this point it is right to say something about estate agents' fees. They are not covered by the Bill. I believe that it would be wrong to duplicate the provisions of existing prices legislation, and in particular those in the Price Commission Act 1977. Agreed scale fees are effectively prevented by the Restriction on Agreements (Estate Agents) Order 1970, and there is, therefore, competition between estate agents as to fees. Nevertheless, the Government recognise that the level of estate agents' charges is of real concern to many consumers and that the amount of fees on a transaction is substantial. My right hon. Friend the Secretary of State therefore intends to refer for examination by the Price Commission the charges, costs and margins of estate agents. I stress that such a reference is in no way a prejudgment of the issue and is in no way connected with the Bill, but since my right hon. Friend had it in mind to make this reference to the Price Commission—it is pure coincidence —I thought it right to make that known to the House now. I thought that it would be wrong if the statement came after the Second Reading debate.
I do not wish to excuse estate agents—I declare my interest in that until five years ago I earned my living in that profession —but are not charges by estate agents in this country generally below the average for the whole of the Western world, and are they not at present extremely competitive?
I do not know how this country compares with the rest of the world. Speaking purely from personal experience, I would say that the percentage rate of charge made by estate agents has risen since the abolition of scale charges. I do not imply any criticism by that remark. The point is that increases in estate agents' charges are unlikely ever to be notified to the Price Commission. That would be very rare, because it is a profession with many branches. The examination that is undertaken is the only way in which the Price Commission will be able to look at the matter.The fact that the Price Commission has been asked to examine estate agents' charges does not involve any prejudgment. Quite often, after a Price Commission examination, the issue has been clarified. The fact that the reference has been made does not involve any judgment against anybody.
On that point, I remind the Minister that when the recommended scale of charges was before the House it was said that the effect of doing away with the scale of charges would lead to the reverse of what the Government hoped, namely, that the scales would go down. It was said at that time that the likelihood was that the scales would go up. This shows that there is a great deal to be said for self-regulation in the profession.
I am not sure that the hon. Gentleman's last remark follows from his earlier remarks. I agree wholeheartedly that there is a great deal to be said for self-regulation, but whether the level of fees follows from self-regulation I am not sure.
Will the Minister tell the House under which of the criteria in section 2 of the Price Commission Act this examination is to take place?
I cannot tell the hon. Lady, offhand. There will be a formal announcement of the reference and I believe that that announcement will be made within a matter of days. Knowing that the announcement was to be made, I thought it proper to tell the House that there was to be an examination, but I cannot give the hon. Lady the precise details of the reference now.
Will my hon. Friend take note that many Government supporters welcome the fact that estate agents' charges and margins are to be scrutinised? Perhaps that scrutiny can be very rigorous, because the costs of moving house these days are absolutely frightening if an owner-occupier uses all the official institutions available.Will the Minister also say how effectively the unofficial estate agency price agreements in existence in some regions of this country are rooted out? In many areas, the charges for dozens of estate agents are precisely the same. How rigorous a look is taken now?
An extremely rigorous look is taken at any agreement to fix charges made by two or more persons, and those agreements would be unlawful. I believe that the Director-General of Fair Trading—this is not dealing with estate agents in relation to other agreements—has registered hundreds—indeed, almost 1,000—of such agreements over the past year or so. That is really a different matter. The Director General's powers of obtaining information about restrictive agreements on charges are perhaps inadequate, but that is another issue, which ought to be dealt with by another Bill.I turn to some of the main features and provisions of the Bill. Clauses 1 and 2 define the activity to be controlled—that is, estate agency work—but because the activities undertaken in estate agency transactions, as commonly understood, are various—they extend to valuation, surveys and auctioneering, to name just a few—and because they differ from practice to practice, it is remarkably difficult to obtain unanimous agreement on an acceptable definition of an estate agent. Therefore, the activity that the Bill regulates is the effecting of an introduction pursuant to instructions in the course of business between a buyer and a seller of an interest in residential property where their aim is to secure a transfer of that interest. The definition of "residential property" in clause 2 does not include within its scope buildings which are principally nonresidential but have an ancillary or incidental residential content. Nor, for the reasons which I have explained earlier, does the protection that the Bill will afford apply in industrial and commercial transactions. Practising solicitors engaged in the course of their profession are excluded from the scope of the Bill. I am aware of the objections to such an exemption, but I am also aware that the buying and selling of houses in Scotland is carried out by solicitors. Solicitors throughout the United Kingdom, however, are already subject to strict rules of entry and conduct and can be struck off for unprofessional conduct. The rules of both Law Societies are as rigorous as any provision proposed in the Bill, and it would be absurd to have two different systems of control applicable to the same persons. Clauses 3 to 8 form the cornerstone of the Bill. They unite the separate elements of consumer protection contained within it. Subject to appeal and, in certain cases, to a warning against the continuation of certain undesirable practices—that, I believe, is a desirable half-way house—the Director General of Fair Trading will be empowered, by order, to prohibit any person from engaging in estate agency work, either in whole or in part, if he considers that person to be unfit to practise on clearly specified grounds. The grounds include conviction for crimes of violence, fraud or dishonesty, contravention of certain provisions of the Bill, a finding of sex or race discrimination committed in the course of estate agency work, and the engagement in any practice in relation to estate agency work which is declared by order of the Secretary of State to be undesirable. Before any hon. Member seeks to intervene, let me say that that power to make an order setting out undesirable practices is subject to parliamentary control. The ultimate deterrent of depriving a person of his livelihood is a powerful sanction, which will ultimately be of benefit both to the public and to the respectable, law-abiding estate agents. That is why so many of them support the Bill. It will not be used lightly or frivolously, and it will be subject to overriding checks and constraints. The aim has been to enable the Director-General to exercise effective control, while permitting him sufficient flexibility in forming a judgment of an agent's fitness to practise. The mere existence of one or more of the grounds for action may not in itself lead to prohibition. At the same time, the agent will be left in no doubt about what actions of his are liable to trigger action by the Director-General. That, I believe, has been achieved by clauses 3 and 4, where, following a warning in some cases, the actions could lead to a banning order. But the agent will be fully aware what action of his might attract the Director General's attention. The constraints on the Director General's powers are contained in clause 7, where provision is made to enable an estate agent to make representations against a decision of the Director General —first to the Secretary of State and, subsequently, on a point of law, to the courts —not only before the Director General makes a banning order but about any refusal of the Director General to exercise his powers under clause 6 to revoke or vary an order made under clause 3 or clause 4. I believe that a fair balance has been drawn here. The Bill attempts to avoid the necessity for two similar but different systems of control. Therefore, it ensures that the Director General's powers do not duplicate those under existing laws on discrimination. Under the Bill, a finding of sex or race discrimination committed in the course of estate agency work will serve only as a trigger event for the exercise of the Director General's powers under the Bill, and only if he should consider it desirable to use those powers. Clauses 9 to 11 enable the Director to call for information to assist him in the discharge of his functions under the Bill. They contain the usual restrictions and penalties on unauthorised disclosure of information to third parties and make provision for powers of entry and inspection to be given to duly authorised enforcement officers. The purpose of clauses 12 to 17 is to achieve an acceptable degree of protection and security for clients' deposits held on their behalf by estate agents. No estate agent will be permitted to accept clients' money unless he is first indemnified against a failure to account for it, subject to provision for exemption where the Secretary of State or the Director General is satisfied that the protection afforded by the Bill is not endangered. Failure otherwise to comply with this provision of the Bill may incur the penalty of a fine. Such a conviction would act as a trigger event for the exercise of the Director General's powers under clause 3. An estate agent will also be required to maintain, and pay any client's money he may receive into, a separate client account. That, I think, is the practice adopted by the overwhelming number of estate agents. It is a common practice of stockbrokers, architects, accountants and solicitors. I believe that the proposal is entirely unobjectionable; indeed, I believe that it is highly desirable. The Secretary of State will be enabled to prescribe by regulation the manner in which a client account will be operated and maintained, and how it should be audited. These proposals will ensure that all estate agents adopt the best existing commercial practices. A comprehensive measure of protection will also be afforded to the general public on a level comparable with the highest standards imposed upon members by the professional estate agency bodies. Another additional advantage of the client account rule is that it will protect the house purchaser against not only the fraudulent or dishonest agent but the careless agent. If an estate agent has become bankrupt, not because of dishonesty or defalcation but through sheer bad luck or judgment, and a client's money has been mixed with the agent's money, of course the house purchaser has to prove his case in the winding up. In future, even if the bankruptcy or insolvency is the result of mere carelessness, protection will be afforded to the house purchaser if a separate client account is maintained.
I am grateful to the honourable—or is it right honourable?—Gentleman for giving way.
I was a little premature in my compliment. I have been listening carefully to the hon. Gentleman. Is he satisfied that he is right in legislating to deal only with residential property and not the rest? Many of his arguments seem to encourage the Bill to refer to estate agents as a whole.
One has to judge how much legislation is necessary. I am sure that the hon. Member for Gloucester (Mrs. Oppenheim), after a recent speech in Oxford Street, would agree that it is desirable to limit legislation to the very minimum. The most vulnerable are those who sell or purchase houses. Those who engage in commercial dealings are much better able to look after themselves. That is the judgment that we have made and that provides the dividing line.Clauses 18 to 23 are concerned with the regulation of other aspects of estate agency. The requirements of clause 18 provide that an estate agent should disclose to a client, before any contract is entered into, full details of the circumstances, particulars and amount of any payment for which the prospective client will become liable. That is, as it were, the price display part of the Bill. Failure to comply with that requirement could result in the estate agent's being unable to enforce the contract. Clause 19 empowers the Secretary of State to prescribe by regulation a limit on pre-contract deposits taken in the course of estate agency work outside Scotland. Within Scotland, however, where the practice of taking pre-contract deposits is not customary, clause 20 will prohibit any person engaging in estate agency work in Scotland from accepting a pre-contract deposit, no matter where within the United Kingdom the interest in residential property may be situated. Clause 21 provides for the disclosure by an estate agent of any personal interest that he may have in a transaction for which he is acting as agent. This will outlaw a potentially unfair practice about which there have been complaints in the past. Clause 22 will enable the Secretary of State to make provision by regulation to ensure that estate agents satisfy a minimum standard of competence. I know that there was a good deal of controversy about this matter when my hon. Friend the Member for Enfield, North presented his Bill, so some change has been made in the drafting which he adopted. I have no desire to restrict entry into estate agency, nor do I wish to force any unwilling agent—whether for reasons of conscience or otherwise—into any of the existing professional bodies. Under the proposals in this clause in setting a minimum standard the Secretary of State, in any regulation that he might make, will have to prescribe a degree of practical experience which will be taken as evidence of competence. In so doing, he may also prescribe professional or academic qualifications as acceptable alternatives. A high degree of academic attainment is not a sine qua non for competence in arranging sales or purchases of houses. This is in no way to decry the value of academic qualifications. But if these proposals are enacted, I do not wish them to become a vehicle for promoting any sectional interests. I think it right that the Secretary of State should consult representative interests and any other person he thinks fit before making regulations under this clause. Indeed, this duty is placed upon him. Clause 23 provides that bankrupts are not to engage in estate agency work. This is an obvious protection for the general public who entrust their money to estate agents. Those are the main proposals. The remaining clauses of the Bill deal with mechanical and consequential matters arising, with one exception. Clause 35 amends the Scotland Act 1978 to take account of the devolution of matters covered by the Act and reserves out of them to the Director General of Fair Trading matters relating to fees paid or to be paid. The provision clarifies the effect of the Scotland Act on the matters dealt with in the Bill, and, in view of the differences in the conveyancing system, land law and civil law in Scotland, they justify the treatment of the Scottish market as a separate market, as does the absence of cross-border trade. Since, unlike Scotland, Wales has the same contract conveyancing and land law as England, and extensive cross-border trade, the Bill is, by analogy with similar matters, not devolved. This approach reflects the devolution settlements as they were agreed by this House. I want to conclude by again acknowledging the debt that I owe to my hon. Friend the Member for Enfield, North, upon whose Bill these proposals are based. Last Session I shared his keen disappointment that his Bill did not reach the statute book. If this one does, I believe that he will be able to claim his fair share of credit for this Bill's becoming law. Let me, in passing, also pay credit to all other would-be legislators on both sides of the House—many of them here today—for the attempt to introduce a measure of control over the activity of estate agents. Our aims have always been the same—to regulate activities in an area where the consumer merits the greatest degree of protection. For 90 years, or perhaps longer, there has been a long trail of broken hearts and some times lost life savings, and it is about time the House cured that grievance. Given the complications of dealing with this area, this is a relatively simple and inexpensive measure. Its aim is not only to minimise the degree of central bureaucratic control—nobody can disagree with that—but, above all, to provide protection against dealings with the criminally dishonest and with the loss of pre-contract deposits. It is a necessary measure, and no reputable agent has anything to fear from it—indeed, he has everything to gain from it. I believe that it will be strongly supported both within and without the House, and I strongly commend its passage.
As the Minister has just acknowledged, this Bill bears a remarkable similarity—almost to the smallest detail—to a Private Member's Bill of the same name that lapsed through lack of time last Session. I happened to notice, in passing, that the word "niece" is misspelt in clause 31 of the Bill, as it was in clause 29 of the last Bill. The parliamentary draftsman responsible for that will no doubt claim in his defence some consistency. I have no doubt that all of us, making similar speeches to those we made last Session, will claim that same defence and will not wish to be criticised for repetition.However, it leads us to ask: if this was a genuine Private Member's Bill last Session, what are the Government doing in taking it over in almost the same shape and form? Either the Government introduced their own measure under the guise of a Private Member's Bill, which would be to some extent an abuse of the House because Private Members' time is essentially limited—the Back Benches value it very highly—or it was a genuine Private Member's Bill and, as the Minister said, the Government have now taken it over, which does not say much for the resources of a great Department of State with three Ministers occupying a large chunk of prime riverside real estate. If they cannot manage better than that, given the extra time they have had, there will be some disappointment. That disappointment has already been expressed by some of the professional institutions, and some of my hon. Friends will undoubtedly have reservations which they will want to examine in Committee. But one must not exaggerate. There have been some changes, and I point with pleasure to the fact that there have been at least three amendments to the previous Bill as a result of representations from the Opposition. The first brings within the Bill's ambit local authorities, housing associations and the Housing Corporations, the second is the exclusion of fiduciary activities of receivers appointed out of court—which was the subject of another amendment we discussed on the last occasion—and the third is a clearer definition of indirect personal interest. These changes are appreciated both as evidence of the power of parliamentary debate and also as confirmation that not all wisdom is at Mr. Deputy Speaker's right hand in these matters. We have the Bill very largely as it was before. It comes against a background of professions wishing to have statutory support in their efforts to exercise self-regulation. The traditional professions of medicine and law have been followed by insurance brokers, credit brokers and now estate agents. In the estate agents' cause, we must give them credit not only for consistency but for considerable determination. For more than 90 years they have been pressing for legislation on estate agency. Unfortunately, there have been a considerable number of mishaps on the way. I think that there have been more positively last appearances for estate agency legislation than there were for Dame Nellie Melba in her heyday. I should like to pay tribute to my hon. Friend the Member for Daventry (Mr. Jones) notably on this side of the House, and before him the late Sir Harry Legge-Bourke. There are others on the Government Benches who have attempted to bring in similar measures. The three major institutions are now largely in support of the Bill. We have the unusual situation in which those institutions, representing anything from two-thirds to three-quarters of the profession, according to the estimates given, are in accord with consumer organisations in wanting to see the Bill on the statute book. But the profession's own codes go much further than the Bill. The codes of conduct of the institutions are very rigorous. We are dealing with only a small minority of estate agents who are bringing the profession into disrepute. That fact should be kept in mind the whole time that we are considering the Bill. We are seeking, with the minimum possible cost and the minimum possible bureaucracy, to outlaw those few rogue agents.
My hon. Friend mentioned in the list of professional organisations a number which he said were self-regulating. He also referred to the minimum possible cost. The Insurance Brokers (Registration) Act will cost the taxpayer nothing. Could not similar thinking in terms of self-regulation have been applied in this matter?
We shall come later to the cost of the Bill, which is described as insignificant.The institutions, in seeking to regulate their own affairs, do so without any cost to the public. But they are concerned about the minority, which at most can be ony about 25 per cent. and which in practice are probably one-tenth of that figure, with whom we are seeking to deal. The relatively low level of cost is probably a reasonable price to pay for that purpose. To the individual person engaged in a house transaction which goes wrong, it is a 100 per cent. catastrophe and not the 1 per cent. or 2 per cent. of estate agency transactions as a whole. We have in the Bill a balanced approach. The choice originally proposed in the Government's Green Paper was a positive licensing system. They have now come out in favour of a negative system which will act largely as a deterrent to misdeeds rather than requiring registration and all the cost and bureaucracy that that entails. I listened with fascination to the Minister when he expounded that point of view. I did not know that it had been expounded by my hon. Friend the Member for Gloucester (Mrs. Oppenheim) in Oxford Street. I shall obviously have to catch up with that particular episode. It makes sense. Indeed, I can quote the Estates Times, which gives our point of view most succinctly. It states that
That applies to a great deal of this measure. I cannot believe that the Minister comes to the matter automatically and by instinct. I think he will have been guided by the salutary lesson of the Consumer Credit Act, the implementation of which has brought a considerable amount of chaos where even discussing the loan of a fiver over the garden fence may be a breach of the law."where legislation is not essential, it is essential that there should not be legislation."
There is a limit of £30.
I am told that there is a limit of £30, so my figure has to be scaled up. But the principle is the same, and people find the system a little alarming.However, the Minister has ambitions of which I should like to remind him. When speaking in June of last year at the annual conference of the Institute of Trading Standards Administration, he said:
I am glad that the Minister has not gone any further with that idea. It might be administratively more convenient. It might be more satisfactory to a Socialist Minister. It would certainly provide a bonanza to a whole legion of lawyers and accountants—lawyers both qualified and barrack-room. But, in my view, the one thing that it would not be is better. We have the tendency to make enabling legislation, of which this is one example, which is not satisfactory to the House and which does not allow the scrutiny which such matters deserve. I see the Minister looking quizzically at me, but I am sure that in his heart of hearts, as a lifelong Socialist, he wishes to see the citizen taken care of from the cradle to the grave. The extent to which he would like this is shown in a press release which he put out this week, which says:"the case for some kind of general legislation creating the power to regulate the practices of trade and commercial activities where there is proven consumer detriment. I question whether we are right to continue to deal with these questions on an individual basis. Would it not be better to consider taking powers to regulate by subsidiary legislation any trade or activity which gives rise to consumer detriment—usually, and indeed almost invariably, by a small minority?"
That has been said by the Minister of State, Department of Prices and Consumer Protection. No doubt he would like to see a Socialist world in which Ministers of State responsible for consumer protection tucked up citizens in their electric blankets with the current piped personally by the Secretary of State for Energy from his white-hot technological desk. However, the Opposition believe that the individual has some freedom which needs to be exercised. We welcome the development in the Minister's thinking which brings him to introduce a Bill of this character rather than the more repressive bureaucratic system that we have come to expect."Sleep peacefully and above all safely with your electric blanket this winter".
Is the hon. Gentleman making light of the advice given about electric blankets? Many people die during each winter as a result of lack of care with their blankets. He is not suggesting that I should not give that advice, is he?
I think that perhaps Ministers are better occupied with great affairs of State rather than with matters that could be left to local officers who would ensure that such things were implemented. I am sure that on occasion he can listen to my comments without taking them too seriously.I turn to a more relevant issue on which the Minister did not touch at all. In the course of his speech, he announced that the Secretary of State was to refer estate agents' fees and commissions to the Price Commission. That does not surprise me for one moment, because we have the irony that the Bill, which is being brought forward to protect the prospective house purchaser, is being introduced when in the first nine months of this year house prices have risen by 21 per cent. and when that trend is continuing into this month. That in itself will have put buying a new home out of the reach of many people. On top of that, this week we have had a record rise in the mortgage rate of 2 per cent. from 9·75 per cent. to 11·75 per cent. That will not only hit very hard the 44 million existing borrowers, but there are thousands more potential purchasers who will be affected by it. For many of these people in the older age bracket, that rise in house prices and mortgage rates will mean that the purchase of a home goes out of their reach for ever because they will no longer have the necessary span of time in which to pay back the loan. Therefore, for the Minister to come forward with this reference shows that it is clearly some cosmetic to give the impression to the public that something is being done about this serious housing situation.
Does my hon. Friend agree that one of the major contributions to the situation at present is the high rate of stamp duty, which has not been reconsidered for some time? It starts at £15,000, and no consideration has been taken of inflation over the last two or three years.
That question has already been raised in this debate. It is a factor in house purchase. However, for a Minister to come to this House and make the announcement of this reference cannot be allowed to pass unchallenged when clearly all that is intended is to seek out another scapegoat for this alarming housing situation.Looking more widely, one would hope that in time the Government could look to the whole mechanism of house purchase as being long overdue for reform. One institution, the Corporation of Estate Agents—I do not know what its standing is in the profession—
It is the smallest of the lot.
Unlike the three major institutions, that corporation opposes the Bill. It finds that on balance it is more objectionable than commendable. However, the corporation interestingly says that it is preparing a paper on the whole question of transactions which lead to a property being built, sold and eventually occupied. I think we would all agree that there is this problem in the chain. There are often two, three or four links. Many of my constituents find it exasperating that they cannot conclude a transaction more easily. They are let down time and again, with all the consequent distress and expense which they are caused.The Bill confines itself to residential property. I think that that is undoubtedly right. The Minister correctly said that it is a major transaction in any person's lifetime and that it is quite unlike any other. As such it warrants special measures of protection. Because people do not buy houses very often—some buy only one in their whole lifetime—they will not have the experience to deal with the sharks. Therefore, they need a reasonable degree of protection. I should not be in favour of extending the Bill to commercial property, where the same conditions do not apply. As coincidence would have it, a recent survey showed that no less than 64 per cent. of commercial concerns were satisfied with the service that they received from their estate agent and only 21 per cent. thought it poor. On those grounds, there would seem to be little call to extend the measure to the sale of commercial properties. Turning to the six minimum conditions to be imposed, first it is intended that there should be a client account for deposits—again, that is standard practice with any reputable estate agent—and that such deposits should be insured. However, one can question whether deposits alone are enough and whether it is wise to limit the bonding only to those agents who take deposits. I wonder whether it will be possible to define "deposit" strictly so as not to allow the practice of asking people for larger advances—it may not necessarily be described as a deposit; it may be an extension of the amount that they pay—and whether that will be insured. We can look at that matter in Committee. The advance statement of charges to be incurred is only part of a growing trend for people to know in advance what their liabilities are likely to be. That is very sensible. The limitation on pre-contract deposits should guard against the worst excesses. However, we have not yet been told what amount the Minister has in mind and whether it will be a specific sum or a percentage of the selling price. A declaration of personal interest on the part of the estate agent is vital. One cannot judge whether any contract is good value unless one knows the standing of the man with whom one is dealing. Finally, we come to the vexed question of minimum standards of competence. We should be adamantly against any proposals which would lead to a professional closed shop. Again, the Minister is at one with us in that. He made it clear in his speech but I should like to underline the point by quoting from his remarks during the second sitting of the Committee in the last Session. He said:
We are grateful for that declaration, because—perhaps for different reasons—we support exactly that view. However, that leads me to one or two criticisms of the Bill. First, it contains a number of enabling clauses. It is not welcome to the House to have to give so much approval to matters in principle without knowing in detail what is intended. Even if the affirmative procedure is adopted, that is not satisfactory. It would be far preferable, if it is not to be in the wording of the Bill, for there to be at least a clear indication on Second Reading of what the Minister has in mind. The Secretary of State can outlaw virtually any offence he cares to name. The minimum standards of competence could be set very high or very low, but there is the safeguard that practical experience will be given a high premium in any assessment of that minimum competence. There is the question of cost. Again, there is concern to know whether it is a casual estimate or whether it has some basis in reality. I notice that the ceiling of £600,000 has not changed during the I1 months or so since the previous Bill was introduced. Does that mean that the figure has not been looked at again, Of was there such a margin of error that it still applies? Inflation has moved on several points since then, and although the ceiling figure is a small amount of money we should like to know exactly."My own view, which I hold very firmly, is that the powers in the clause should be used only for the protection of the consumer, not to create any kind of unnecessary barrier to entry to the pofession."—[Official Report, Standing Committee C, 26th April 1978; c. 112.]
It has gone down.
The fine calculation that it will lead to an increase of only four personnel in central Government will be greeted with great scepticism everywhere.The powers of the Director General of Fair Trading are considerable and penal. I should welcome from the Minister, when he sums up, some further comment on the appeal procedure that he envisages. I know that the profession would like to be assured that professional people will be among those to whom the Secretary of State turns for advice on these appeals and that he will not turn to some new quango made up of ex-trade union leaders looking for a job. There were two serious questions which led to controversy last Session and which will undoubtedly do so again. First, there is the question of double jeopardy. It applies to racial and sex discrimination. I accept that estate agents ought to be doubly vulnerable to the offence of fraud, but is violence relevant? Violence might take the form of wife battering or husband battering. That is very reprehensible, but is it necessarily relevant to estate agency work? If a person who is convicted under the Sex Discrimination Act or the Race Relations Act happens to be an estate agent, why should he be subject to the risk of a further penalty? Admittedly, it is only a risk. But the double jeopardy is there in principle, and it seems unfair, particularly as those two measures came forward only a few years ago, the Sex Discrimination Act in 1975 and the Race Relations Act in 1976. Finally, there is the clause which gives powers of forcible entry. There is no doubt that that clause, too, will provoke concern. It allows authorised officers powers to enter, to require the production of documents, to take copies, to seize and detain any books or documents, to require the breaking open of any container and, if the occupant of the premises does not comply, to break it open. Is that warranted? It is small wonder that the clause has been named the KGB clause. Certainly, it smacks more of 1984 than of 1978. It is entirely alien to our easy-going way of life. It is a clear breach of the liberties of the individual. Why is it necessary in a consumer protion measure? Of course, the precedents are unfortunate. The Counter-Inflation Act 1973 and the Finance Act 1972 introduced these powers, but at least those measures can be said to be different in character. There it is a question of evasion of revenue—what might be broadly called crime against the State—but here the purpose of the Bill is to protect clients' moneys in small transactions relating principally to residential property. If a prospective purchaser were abused, he would almost certainly take up the matter with the authorities and would almost always have the necessary evidence. In the small fraction of cases where this was not so, surely these police state powers are not warranted. In case the Minister thinks that I exaggerate, he should turn to his noble Friend Lord Houghton of Sowerby, the former chairman of the Parliamentary Labour Party, who expressed similar concern, and Lord Spens, who put it more bluntly. Speaking of a case with which he was concerned, Lord Spens said that it was
We believe that the Englishman's home is still his castle. My hon. Friend the Member for Edinburgh, North (Mr. Fletcher), who will wind up on behalf of the Opposition in relation to the aspects concerning Scotland—which has more castles per acre than any other part of the United Kingdom—will no doubt confirm that a Scotsman's home is also his castle. While he is about it, perhaps he can confirm that for the Welsh and Irish too. The Opposition think that the clause is out of place and should be removed. In conclusion, we welcome this measure as providing some reasonable protection for the public in the all-important sphere of house purchase. The purchase of a home is the most important transaction most people experience in their lifetime. They should be protected against the worst excesses to which estate agencies can be prey. But they will still not have a complete safeguard. Consumers in this respect will still need to have their wits about them, and it is right that that should. I am indebted to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) for the quotation from Spencer, making the point that"a horrible example of the kind of police state that had apparently been reached through allowing almost uncontrolled powers of entry and seizure to be exercised by persons other than the police".
People are entitled to a reasonable degree of protection when they undertake a major transaction of this kind, but they cannot expect at all times to be protected against all risks. At the risk of venturing yet another unfulfilled prophecy, it looks now as though an Estate Agents Bill will reach the statute book, and we wish it well in its passage."the ultimate result of shielding men from the effects of folly, is to fill the world with fools."
The hon. Member for Romford (Mr. Neubert) has raised a number of very interesting points. Most of them, however, can be dealt with adequately in Committee.The Government have resurrected this Bill from one which was introduced by my hon. Friend the Member for Enfield, North (Mr. Davies) on 3rd February this year. My hon. Friend has been paid the compliment of its being adopted practically in its entirety. In the Second Reading debate on that Bill, I referred to the many efforts over the years to provide necessary legislation dealing with estate agents. I said that there was clear evidence of the needs and interests of the consumer, yet no Government had done anything at all in the matter. I am glad to see that this deficiency is now being remedied. I am particularly gratified that the protection of prospective purchasers and sellers is placed in the hands of the Director General of Fair Trading. There have been many previous suggestions. I certainly prefer this method to what I consider would be the rather cumbersome method of regional boards. It is true that the majority of estate agents are worthy members of their profession, but in my own experience I have come across a considerable number of cases of litigation resulting from the conduct of estate agents. At the moment, any person may set himself up as an estate agent without qualifications of any kind. Yet estate agents often deal with persons who are illiterate and are unable to understand the forms which they have to sign and which bind them to provisions that may result in serious financial loss. I welcome particularly the provision that money paid by clients must be put into a separate account and that, under clause 16, there must be insurance of clients' money. In many cases some rogue, setting up as an estate agent, has taken deposits from different clients on the same property and has absconded with the money. Such a person sometimes has finished up at the Old Bailey, or some other tribunal, but that is small consolation for a client who has lost his hard-earned money. In the Second Reading debate on the Bill introduced by my hon. Friend the Member for Enfield, North, I referred to some points dealing with the position of a sole agent and the question of interest. I do not wish to take up the time of the House by repeating them, but I hope that those matters will be looked into in Committee. Despite what has been said by the hon. Gentleman and, indeed by my hon. Friend the Minister, in my view the only flaw in the Bill is that it is limited to prospective buyers and sellers of residential property. I believe that there is a strong case for extending its provisions to cover all types of property. Indeed, I do not think that it is clear whether it applies to all types of property part of which is residential. That matter ought to be considered a little more carefully. I welcome the Bill. I hope that at long last, after all the previous attempts, it will soon find its way on to the statute book.
The Minister, at the beginning of his speech, understandably ruled out any discussion of the question of fees, and has indicated that it will be examined by the Price Commission. The Commission might care to look at the question of who pays the fees. I should be grateful to right hon. and hon. Members representing constituencies in Great Britain for their comments, because the problem has exercised the minds of various people in Northern Ireland, where in some instances both the vendor and the purchaser pay fees and charges.It is a peculiar subdivision, because generally where land is concerned—and that includes farm buildings—the vendor is responsible under what is called the Commission on Sales of Land Act (Northern Ireland) 1972. Apparently payment of auctioneers' and estate agents' fees and charges on other property is not subject to statutory control either in Northern Ireland or in Great Britain. It may be that I have been misinformed on the latter point, but, if so, I hope that the Price Commission will feel able to provide some guidance on the wider responsibility for payments. My right hon. and hon. Friends and I find ourselves in broad agreement with the principle and intent of the Bill. Certainly, in consulting the various interested parties in Northern Ireland, we found that the measure enjoyed the same general welcome and approval as has been expressed by hon. Members in today's debate. I propose at this stage to confine my remarks to one or two areas of general interest and concern, although I believe—I imagine that most Opposition Members take a similar view—that there are some very important issues attendant on this Bill which should be carefully considered in Committee. Bureaucracy is already too prominent a feature of life in Northern Ireland, and we are naturally inclined to he hesitant about any measure which might swell rather than stem the tide of interference and control. I am sure that no such intention lies behind the introduction of this legislation, but I urge that caution should be exercised and that warnings should be heeded. Those basic issues apart, I urge caution in the application of the details of the proposed changes. In particular, I am anxious that the enforcement of new arangements should not serve to weaken or threaten the position of small estate agents in rural areas, such as we have in Northern Ireland and such as exist in many constituencies in Great Britain. In Northern Ireland they provide, as I am sure they do in this country, a very effective service to the people in those areas. Therefore, it would be regrettable if their interests or their scope were in any way damaged. Concern has been expressed lest some form of compulsory qualifications be imposed. The one certain and inevitable consequence of that would be that small agents would become scarce. They would be quickly thinned out. The other natural consequence would be that consumers would be compelled to seek the assistance of more professional, but also far more expensive, concerns. Small concerns do, of course, experience problems connected with the various forms of capital taxation. Generally, they are not equipped to deal with this matter. I should be very reluctant to suggest any kind of two-tier operation, and I would leave it to those more experienced in this area to say whether a solution might be found along the lines of guidance given by the professional bodies themselves, such as providing categories of concerns experienced in these rather specialised matters. I should like to make a comment about the enforcement of the new arrangements. I note that the responsibility in Great Britain is to be placed on the local authorities. But in Northern Ireland it will be the concern of what, in clause 26, is called "the Department of Commerce". As the House knows, we in Northern Ireland are still deprived of any elected local bodies corresponding to the local weights and measures authorities in Great Britain. I should therefore like to be perfectly clear where the responsibility will lie during the interim period—which I hope will not be too lengthy—before real local government is restored to Northern Ireland. As the Department of Commerce is one of the Departments which comes under the Secretary of State for Northern Ireland, I assume that it will be he who will be the responsible authority in Northern Ireland. Can I have a "Yes" or "No" answer to that question from the Minister when he replies? In any case, should not the real bearer of the responsibility be made clear in the Bill? This, of course, raises the question of appeal, which is provided for in clause 7. Surely it is not intended that an appeal against the decision of the Secretary of State for Northern Ireland, if that be the case, should be directed to the Secretary of State for Prices and Consumer Protection, who is presenting the Bill today. I trust that when replying the Minister will feel able to clarify the position on this point.
I wish to speak strongly in support of the Bill in principle, although I have reservations about certain parts of it. Perhaps I can ask for some assurances to be given in the Minister's reply.My support for measures similar to this Bill is of long standing. It is my strong view that the regulation of estate agents and what they do is not only due but overdue. If one reads Hansard over the years, one sees that this House has been littered with abortive attempts at trying to regulate estate agents and their practices. It is encouraging and appreciated that the Government have now made this matter official business. I sincerely hope that it will succeed. I anticipate that we shall be arguing about how regulation is to be carried out rather than the principle of regulation. I strongly support in principle what the Bill attempts to do. As I see it, its main purpose is that in this important area of commercial life only fit and proper persons are to be engaged in this trade. That is a commendable objective. This is a crucially important part of the growing and necessary framework of consumer protection, particularly in housing services. I fully recognise—here I agree with the hon. Member for Romford (Mr. Neubert) —that one can never legislate against the old proverb that a fool and his money are soon parted. But what one can do is to try to construct a framework of regulation so that in this area of housing service people are not "taken to the cleaners" by a minority of sharp operators. That is about all one can do. It is quite right that the Bill should propose that the Director General of Fair Trading should decide the question of fitness to practise, and on certain specified grounds should have the power to prevent certain people from practising as estate agents. I commend the way in which this has been done. It can be said that this is being attempted with the minimum of bureaucracy. The proposals are quite flexible and there is no top-heavy machinery. That is very creditable indeed. The requirement that clients' accounts into which deposits must be paid must be established and properly covered by insurance will be widely welcomed. I am sure the House will agree that it is to the credit of estate agents generally, and of their professional organisations, that the malpractices often complained of are perpetrated by only a small minority of unscrupulous operators. It is also to the credit of all concerned that of the tens of thousands of transactions involving house transfer which take place every year only a very small proportion involve malpractice. That should be heavily underlined because it is a fact. But the malpractices which do occur are serious enough. They have the consequence of tarring all estate agents with the same disreputable brush. That is very much to be regretted. One of the significant things which must be pointed out is that no body of people is more concerned to eradicate these practices than estate agents themselves. In this context it is important to note that the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the Incorporated Society of Valuers and Auctioneers are all in favour of this measure, although they may lay different stresses on different parts of it. But it is overwhelmingly true to say that the Bill has widespread support among the public and the estate agents themselves, and I am sure that that will be proved in the House. The Bill provides statutory backing for the voluntary measures already taken by organisations of estate agents. I have one reservation to make—and the Minister and Opposition spokesman have already expressed themselves quite firmly on this point. I welcome that very much. It involves the complex matter of qualifications and standards of competence and who is to decide them. There is a lot of room for argument on this matter. But I share the concern of the Consumers Association and others that in the future this Bill will point to what I would call a regulated open situation and will prevent a situation from occurring which I would call "regulation of professional monopoly" dominated by levels of professional qualifications which are too high for the task involved. If in estate agency we have a repetition of the situation which now prevails in conveyancing, I think that that will be a step in totally the wrong direction. Some hon. Members will know that under section 22 of the Solicitors Act 1974 effectively a monopoly of preparing certain transfer documents is given to solicitors. That has had the most appalling consequences for the owner-occupier in terms of conveyancing charges. If the same is to happen in estate agency work in future, I am sure that it will be a disaster. If we have another Law Society battening down on owner-occupiers, I shall wish that we had never started on this legislation at all. It is sometimes asserted that high professional qualifications go hand in hand with a high standard of ethics. That is not a necessary correlation. One can have all the professional qualifications in the world and still be as bent as a hairpin. When I read reports from time to time about crime and punishment, I notice that most of the big financial crime is committed not by a man in a striped jersey with a mask over his face but by sharp professionals in expensive pinstriped suits. In certain areas of life one may have a monopoly of professional qualifications and the ability to do the job. But this does not automatically mean that one has a monopoly of honesty. This Bill is a limited measure, creditable though it is. It is high time the whole question of the expense of moving house was looked at in great detail because there is enormous dissatisfaction about it throughout the country. Let us assume that a person who is moving house is buying and selling for around £20,000. Let us further assume that he uses an estate agent and a solicitor to convey the property, both buying and selling. Let us assume that he pays stamp duty, Land Registry fees and all the other bits and pieces. When all this is added up, it costs him £1,000 to move across the street. That is an appalling state of affairs. More than 50 per cent. of the houses in this country are now owner-occupied. The average person moves about once in seven years and each time he takes out a mortgage and employs a solicitor. This amounts to a very onerous burden. I strongly suggest that the Government should have a detailed and structured look at the whole question because it is causing enormous dissatisfaction. Many people who operate in the housing services market are beyond the reach of any incomes policy. We should look very critically at ways of reducing the cost of moving house, estate agency fees, and so on. We must make a structured attack on one of the most expensive undertakings of people of moderate means. This is long overdue because the costs of moving house today are absolutely frightening for the ordinary person. This Bill is very welcome and I am sure that it will get the support of the House. It is long overdue, but I suggest that it should be a first step in the wholesale and radical reform of the provision of housing services, legal services and others in their entirety.
I begin by declaring an interest as a partner in a Birmingham elate agency and a consultant to a house building firm. However, I also speak as a not-so-sharp professional, in a rather cheap pin-striped suit. I agree with much of what the hon. Member for Ipswich (Mr. Weetch) said, but I do not concur with his well-known and long-standing views on the legal profession.My hon. Friend the Member for Romford (Mr. Neubert) mentioned a press release which the Minister of State made earlier this week. It went like this:
I hope that after the Second Reading of the Bill and after it goes to Committee the Minister of State will not put out another press statement saying to house buyers, particularly first-time buyers, "You will now be safe buying houses—there will be no problems." So far in the press—and I do not know whether the Government are responsible for this—the Bill has been portrayed as giving the impression to first-time buyers that all the problems will be over and that this is a radical measure which will make it much easier and much safer to buy a house. That is not the case. As the Minister said earlier, buying a home is normally the most expensive exercise of any person in this country. It is fraught with danger, and occasionally people come severely unstuck, because of incompetence or worse. There are two areas where there are serious problems and where the public are very badly affected. The first is that of gazumping, which is not mentioned at all in this Bill. Many hon. Members have had young first-time buyers come to their advice bureaux and have seen the pain and suffering that they have gone through after missing a house that they dearly wanted and that they thought they had bought. There are those, like myself, who are semi-practising estate agents who have seen young buyers come into the office having been gazumped elsewhere in Birmingham and who know what hardship and pain are all about. Very often the estate agent is not to blame: the vendor of the property is responsible. On a number of occasions, I have parted company with a client who was insisting that we gazumped a purchaser. As respectable and responsible agents, we refuse to do this, and therefore we have had to part company with the client, who has gone elsewhere to sell through another agent. Although I sympathise with the view that we do not want more legislation, I ask the Minister of State to consider whether there is some way of bringing the force of law into the area of gazumping so that an agent can refuse to gazump on the ground that by doing so he would be breaking the law. At present we cannot do this; we have no teeth. All we do by being honourable and respectable is to lose business. I admit that I would rather lose it than have that sort of business. Even though we lose such clients, they go elsewhere and the gazumping still occurs."Sleep peacefully, and above all safely with your electric blanket this winter."
I am disappointed that the hon. Member for Hornsey (Mr. Rossi) is not here. I understood that in his speech at the Conservative Party conference he said that his party would bring forward proposals to deal with gazumping. Perhaps the hon. Member for Birmingham, Stechford (Mr. MacKay) could tell us what proposals his party has in mind.
I am delighted to be enlightened by the hon. Member for the Isle of Wight (Mr. Ross). I had a very pressing constituency engagement on the Friday of our party conference and was not present. I shall be delighted in due course to pass on to him the details that we have. It proves that my party is farsighted on these matters and is looking into them. I hope that in his reply the Minister of State will say that he is doing the same.The second area in which many people come unstuck is in selling their houses. I made this point during the Second Reading debate on the Private Member's Bill of the hon. Member for Enfield, North (Mr. Davies), but I did not get an answer. It applies to Birmingham, and I have a feeling that it applies everywhere else. It happens in cases where the seller of a house decides to advertise privately and not go through an estate agent. That, I believe, is foolish, but he is perfectly entitled to do it. On seeing the advertisement in the local paper, the rogue agent goes to the house and tells the would-be vendor that, although he is advertising for £15,000, he could get him at least £20,000. Human nature being what it is, the vendor agrees to let the rogue agent handle the deal. Often the more foolish people in society turn out to be the more avaricious members of society. The rogue agent then asks the person to sign a document which is perfectly legally drawn up and is legally binding. That document says that the agent will act for six months and that in that time no other agent can act. After six months, whether the house is sold or not, the agent may claim his full commission. A respectable agent claims his agreed commission only on completion of the sale. This agent, who will never sell the house at the inflated price, can legally claim in full. I suggest that the answer is to have a cooling-off period—I would appreciate the Minister's views on this—so that if after two, three or even four weeks the rather foolish seller of a house realises he has been misled he can, in effect, tear up the agreement. I should like to move on to various points in the Bill about which I have reservations. As the Minister of State is aware, I am a supporter of this measure as I was of the previous Private Mem- ber's Bill last Session. I am extremely worried about the bonding clause. I am in favour of bonding and in favour of the deposits being secure. What concerns me is whether the small agent with limited resources will be able to find an insurance company or a bank to bond with. If he does, will the premium be extortionate or reasonable? With the greatest respect to the hon. Member for Enfield, North, we never found this out in Committee on the previous Bill. If the premium is large, surely that premium will be passed on by way of costs and fees. This worries me greatly. I hope that the Minister and his Department have made representations to the insurance companies and to the banks on this point. Before I leave the question of bonding, I make one small plea for those agents who, by Christian conscience, cannot enter into bonding arrangements. I have had many representations during the year on this subject. I feel that the people concerned have a valid point. I do not want to press the matter now, nor do I even require a reply from the Minister of State, but I hope that it will be further considered in Committee. There is great concern, as my hon. Friend the Member for Romford has mentioned, about the double jeopardy clause, about the fact that this is so much a consumer protection measure, and also about the effects of the powers of entry as they apply not so much to this Bill as to the precedent that we are setting for further legislation. I think it could be extremely dangerous. I would ask those who will be serving on the Committee to look further at these points. It is always welcome to sit in this Chamber and to learn something about what will happen in the future. I was interested to hear the Minister of State tell us that his Department, or perhaps the Price Commission, was to look into charges made by estate agents. 1 know that my practice will greatly welcome this because we have felt for some time that what we charge does not fully cover our costs and enable us to make a reasonable profit. I believe that, in my part of the country—I cannot speak for the whole country—this will be most welcome and perhaps will mean that we can make minor adjustments in the fees that we charge. Our experience is that, since the scale charge was abolished, as the Minister of State mentioned, to be competitive and to obtain clients we have had to offer our services for considerably less than the scale rate and often at such low fees that, if it becomes a complicated transaction, at the end of the day we barely make a profit on it. It will be most interesting to see the outcome. The hon. Member for Ipswich wisely said that the costs of buying and selling a house have become grotesque, to say the least. One area where we must move forward—I was delighted to hear the intervention of my hon. Friend the hon. Member for Ilford, North (Mr. Bendall) —is on stamp duty. The amount of stamp duty paid today on a house is considerable. It starts, if my memory serves me correctly, at between £15,000 and £16,000. If one goes back a few years, £15,000 or £16,000 in my part of the world was a lot of money to pay for a house. One could have a most substantial house and only the most wealthy members of society were paying this particular tax, which was fair and equitable. Today, a three bedroomed modern town house in Birmingham will sell for £15,000 to £16,000. For £25,000, where there is substantial stamp duty, one can buy only a modest semi-detached house and the purchaser can be earning a relatively modest, certainly not above-average, income. The great beneficiaries of inflation have been the Chancellor of the Exchequer and the Treasury. As house prices have risen, so more and more transactions have come into the orbit of stamp duty and therefore the revenue has increased. I know that the Minister of State cannot answer this point because it is not the responsibility of his Department, but I have no doubt that he will be passing on the comments made in this debate to the Treasury. Having made these reservations, I still welcome the Bill because all respectable estate agents are concerned that a small number of rogue agents are giving the profession a bad name. We can only benefit by any measure that will, however slightly, restrict these people. I conclude, as I started, by saying that the measure has no teeth. It will not help the innocent buyer or seller. It would be interesting to know from the Minister whether we are to have something more substantial in due course which will genuinely protect those involved house transactions.
I am somewhat in the position of a father in ancient Rome who would walk towards a child but who until he lifted it up was not sure whether he recognised it as his own. Hon. Members will appreciate that I have reached the stage, in the regulation of estate agents, at which I can recognise almost every wrinkle on the child's face—although this measure has a distinctive Scottish accent which I cannot quite recognise from last year. Nevertheless, the basic issue of the regulation of estate agencies which I attempted to tackle, as a private Member, last year clearly concerns valid issues and ones on which the community now expects action to be taken.We have introduced elements of consumer protection but, as hon. Members have mentioned, in this most crucial area of all, in the area where one is making the most important purchase, people feel extremely vulnerable on the grounds of lack of experience. Although the number of times one buys and sells houses increases each year, for the average person the opportunity still arises only once every seven years or so. Increasingly, as opportunities for owner-occupation develop, first-time buyers become an increasing sector of our community and it is clear that people lack experience in handling issues like house transfer. It is also clear that the process itself would try the patience of Job. I agree with my hon. Friend the Member for Ipswich (Mr. Weetch), who displays keen knowledge in this area, that we have to think seriously about how we can simplify and streamline the process of property transfer so that it is not so daunting and costly. I had hoped to see this measure on the statute book last year. A small number of people, not perhaps to be measured even in their thousands, have paid a cost for the fact that the defences that this measure offers to the consumer are not operative at present. I hope that they will be in a few months' time. Since the failure of my attempt last year, I have had a number of letters from people identifying areas in which they have been vulnerable. They would have had a modicum of protection from the measures which I introduced. Of course, a few malpractising operators cast a slur on the whole process. That is why we have the support of the serious bodies. Some have reservations on detail, on points which we discussed last year and will certainly discuss again. There is no great debate about certain fundamental issues of principle which reputable estate agents are aware need to be defended to ensure that the disreputable do not blacken the whole profession. That is why I regret that we did not make progress as rapidly as we might have done last year. Of course, I would have gained some self-satisfaction, but that is not the reason. The basic reason is that we should not underestimate the fact that if we introduce delay into our procedures on protective and commendable measures, people are unnecessarily vulnerable for that extra time. It is important to protect clients' money. As Conservative Members with experience of estate agency work will confirm, that is what reputable estate agents do, but there are horrendous examples, as the Minister of State said, of money being lost. However, as I have talked to people about these issues over the last 15 months or so, I have found that the much more significant issue to establish is declaration of interest. People are vulnerable here when the person disposing of the property is aged or infirm or cannot look after his interests or when the property is handed on to relatives living some distance away, who cannot give close attention to the details of the transaction. A great danger, which has arisen all too often, is that such people have thought that the property was being put on the market at the market price, only to discover that the price at which they settled was paid by an estate agent, who subsequently sold the property to his advantage. I have had a number of letters since the summer in which reputable people have given examples of such incidents—not because they were themselves vulnerable but on behalf of others who were wide open to this practice. I am not saying this to blacken the whole name of estate agents or to prove that the prac- tice is rife. But it goes on, and it should be stopped. The significance of the Bill is not just the people that it will nail in law but the climate that it creates. When the Bill becomes law, as I hope it will, I believe that the number of cases which go to law as a result will be fairly limited. However, equally clearly, those who feel that they can put up a board and operate as estate agents, perhaps in the next property boom, to make an easy rake-off with some of the more dubious practices, will think twice if complaints can trigger off a rigorous investigation. That is the aim of the Bill. It will raise professional standards across the country. Those Conservative Members who talked last year about double jeopardy should think carefully about that argument. The phrase is one which makes us all wary. It is a well-established principle of English law that one is not tried for the same crime twice, but any serious body offering a professional service which requires higher standards than the mere taking of money for an immediate service must recognise that double jeopardy is inherent in its work. Any serious professional body knows that an individual in that organisation can pay a price in terms of the ordinary law of the land and also fall foul of the profession's high standards and its attempt to protect the public against the malpractice of its members. I do not want to emphasise this point too much, because none of us wants to create closed professional status for estate agents. But that element of double jeopardy on the margin is written into a Bill which provides that someone who has committed an offence may disqualify himself from carrying out this significant service as an intermediary. Subject to the control of the Director General of Fair Trading, that system is eminently sensible. Without it, we should have to have some full-scale regulation or licensing system, which itself would build in a rigorous concept of double jeopardy. Those who have raised this matter should recognise how marginal it is to the protection offered by the Bill. But, so far as it exists, it is essential to the measure's effectiveness. I therefore hope that the Bill will make speedy progress. I was concerned that the hon. Member for Romford (Mr. Neubert) should say that risk taking should be encouraged more. In regard to some ideas of organising the economy in macro-economic terms, I am prepared to treat that as a serious argument—although I do not agree with it—if only because the Conservative Party continues to attract the support of a substantial minority of the people. But when it comes to consumer protection the hon. Member is stretching a point. The hon. Member quoted Spencer, the arch-priest of nineteenth century capitalism and his dictum that the consumer should beware—caveat emptor. But that scarcely fits the modern requirements of our complex society which a whole range of our constituents have demanded from us. Not only my party but, in a limited way, the Conservative Party has delivered in this respect. The notion of consumer protection is essential to the good ordering of our society. I therefore hope that such stringent ideological arguments will not be attached to the Bill. I pay tribute to the work of my hon. Friend the Minister in developing the Bill. His concern with the subject predates mine by more than a decade. He introduced his Private Member's Bill in 1967 and therefore it is fitting that he should have the opportunity to pilot through this Bill. I hope that hon. Members recognise the force of the argument put forward most ably by my hon. Friend the Member for Ipswich that this is just a small step forward. It is not an initial step, but it is an early step towards improving enormously the process of property transfer. We should not oversell the Bill. It will offer protection against some dubious practices by estate agents, but it will not revolutionise house transfer, and nor will it automatically greatly reduce costs. We shall have to do a great deal more if we want to achieve those objectives. The demands, however, are there, and they are growing in volume. It is our duty to respond to them. It is not good enough that we operate the house transfer market on a model that suited that very small percentage of people who were involved in the buying and selling of land 100 years ago. Circumstances now are such that the majority of our con- stituents become involved at some stage in some form of house transfer. It is time we recognised that a radical approach to the matter is needed. During the passage of my Bill last year I received widespread support for what I was attempting to do. My constituents and others felt, however, that since we were dealing with estate agents we should consider the two main problems, which are the total cost and gazumping. On the first, I accept that estate agents' fees—and I welcome the Minister's assurance that they are to be investigated—are only a part of the problem. On the second, while gazumping may be aided and abetted from time to time by estate agents, they are not the prime movers in that activity. The basic reason for house prices being bid up after an initial commitment has been made is that the whole process of transfer is so protracted. There are so many opportunities for other people to come in after the first push. That difficulty is not easy to remedy, but it will not be tolerated much longer by house purchasers. I am sure that the pressure for us to do something about the problem will become increasingly apparent to us all in our surgeries. Of course, I recognise the limitations upon doing anything quite so radical in a Private Member's Bill. If we are serious about giving proper protection to people in house transfer, we have to look to the root of the process and bring forward Bills which will build upon the experience of this Bill and use its advantages. We must, however, go much wider with major reforms. I therefore confidently predict that the House will see a degree of merit in the Bill. The one matter on which I am sure there will be extensive debate in Committee is that of competence. I found it difficult to tackle that aspect in my Bill. I am by no means certain that the Government have it right in the measure before us, or that the issue is one that can readily be resolved. It is clear that we will not improve the service provided to the community if we create a narrow professional monopoly. Equally, we cannot tolerate the situation which was brought to my attention by my hon. Friend the Member for Caerphilly (Mr. Evans). One of his constituents had placed her property in the hands of an estate agent who held it for three or four months. The constituent wanted to know how the transaction was progressing, and she received a letter which ran to six or seven paragraphs of closely typed script. Not one paragraph in that letter, however, made any sense. None of us could make head or tail of it. It communicated nothing to the constituent, and my hon. Friend, like myself, was unable to put an interpretation upon it. Clearly if we have to guard against the Scylla of a professional monopoly we have also to guard against the Charybdis of those who take fees for services when their level of competence is so abysmal. These circumstances are not comparable to someone buying a bag of potatoes and finding a percentage of them to be uneatable. My hon. Friend's constituent lost several vital months in the transfer of a property in circumstances where that time would have meant a great deal to her. We have to regard with due seriousness the nature of this transaction, which is why it is so important to get this Bill into law as soon as possible.
I am pleased to give a general welcome to this Bill. Although I shall be critical, as other hon. Members have been, of some of its provisions, there is no criticism that is so fundamental as to render it necessary to vote against the principle of the Bill. The criticisms are of a type that can satisfactorily be taken care of in Committee.This is unashamedly a measure of consumer protection—and none the worse for that. But I express the wish that in enacting consumer protection legislation on this subject we shall not do it in such a fashion as to make it difficult to the point of impossibility for even the most reputable estate agent to continue to perform the service to the community which the vast majority of them have performed in the past. The first point that merits discussion is the provision which would prohibit persons from engaging in estate agency unless certain criteria were met. That provision is broadly acceptable, but I must again draw attention to the question of double jeopardy. The penalties already suffered by estate agents under race relations and sex discrimination legislation are severe enough, but to add to them the prospects of the loss of livelihood is something which we cannot dismiss in the way that the hon. Member for Enfield, North (Mr. Davies) was inclined to do. However, I am prepared to concede that the difficulty of finding a way round the problem is such that we may be forced to accept that we cannot overcome it. I hope that at the least, because estate agents feel very strongly on the subject, we shall be able to explore the matter in depth in Standing Committee, as was done during the Committee stage of the hon. Member's Bill. I hope that we shall be able to understand the difficulties and fears of the estate agents and avoid going as far as the hon. Member for Enfield, North has implied, which means introducing a full-scale system of regulation and licensing. I move now to the provision of the Bill which would protect the client's money by the requirement to effect suitable insurance and to introduce proper accounting procedures. As far as that goes, it must be wholly welcome, but I am forced to ask the Minister one or two questions. He has announced that the fees of estate agents are to be referred to the Price Commission. I think my hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) was possibly a little optimistic when he said that he felt that the purpose of the Minister's exercise was to see by how much more the fees of estate agents could be justified. I have a feeling that the aim is possibly not entirely along these lines, but I hope that if the Price Commission or anyone else is to examine estate agents' fees they will take into account the additional cost, particularly to the smaller estate agent, of the requirement to effect insurance against the loss of a client's deposit. It is a perfectly correct aim, but, as one who is not entirely without experience of insurance, I must tell the House that this is not an easy type of insurance for the small estate agent to obtain. Even if it is obtainable, it is hardly ever to be had cheaply. I wonder whether in the run-up to presenting this Bill to Parliament there have been discussions with the British Insurance Association, representing as it does the vast majority of insurance companies in the country, and whether any indication has been given that in enacting a requirement to insure we are not laying down such a requirement as to render it impossible for the estate agent to conform, therefore effectively putting the small estate agent out of business. I do not accuse the Government of seeking to do that, but I should like some reassurance that this possibility had been taken into account before the Bill was presented. I also want to know whether the cover which will have to be obtained by the estate agent will be governed by the size and the type of his activity. I move now to the requirement for the establishment of minimum standards of competence. This is unexceptionable in principle, but I cannot help feeling that the Bill is rather too vague on the methods to be employed. It burbles on about academic standards and professional bodies. I have no objection to the aspiration towards professional standards by estate agents. I have nothing but praise for the codes of conduct laid down by professional bodies. But I must express this reservation. If the client's money is safe—and other parts of the Bill will achieve that—are we not running the risk of putting a halter around the neck of the enterprising estate agent? I believe that this is a highly competitive business. To try forcibly to feed into it professional standards of the kind readily acceptable in other professions is something we should think carefully about before we legislate. The powers in the Bill—if I may move to another of the more controversial areas—to obtain information by force are, in my judgment, not at all desirable. This is not so much because of the implications for this Bill but because of the possibility that they will be a forerunner for other Bills, when it might be difficult to see where such powers might take us. In many ways, it seems to be taking a sledgehammer to crack the relatively small nut of the recalcitrant estate agent. How will these powers be used while, at the same time, defending the personal freedom of the individual estate agent? Is there not an argument, which I do not see referred to in anywhere in the Bill, for obtaining a court order before these powers can be enforced? Has the House learned nothing at all about the activities of VAT investigators and all the alarm and concern they caused, predominantly to small businesses? Are we not bidding fair to repeat the same sort of mistake if we enact this legislation precisely in the terms before us? The methods to be employed present another burden for the local authorities. Here I must echo the scepticism of an earlier speaker and say that the estimates of the additional staffing requirement are highly optimistic. I turn now to the appeals procedure under clause 7 and wonder whether they are adequate. Should not the Secretary of State be required to seek expert advice? Should there not be a requirement for a panel of professional advisers constantly available to advise him on the highways and byways of a profession that is not always adequately understood? My hon. Friend the Member for Rom-ford (Mr. Neubert) has referred to the Corporation of Estate Agents, the smallest and, I believe, the newest body in the profession, which has indicated its opposition to the Bill. I did not feel, on reading its submission, that it was opposed to much more than the detail of the Bill. I leave that aside, since I want to underline the fact that it is one of the principal bodies arguing, as several Opposition Members have argued, for a complete revamping of many of the laws surrounding house purchase transactions. 1 am not opposed to the simplification of house purchase. I have long believed in the ideal of owner-occupation, and if there are ways of amending the law by making it easier and cheaper to purchase a property I would not wish to oppose that. I certainly would not wish to oppose a measure which effectively dealt with what can only be called the social evil of the 1970s, namely, gazumping. But I have yet to see an adequate measure to take care of gazumping. I hope that, whatever we do, however we improve the law on house purchase, we do not in the process choke the enterprise of the small builder or the small estate agent. I hope that we do not entirely cut off the expertise of the legal profession, no matter what criticism may be directed against it in the matter of house purchase. I must now declare an interest, because I am the parliamentary adviser to the British Insurance Brokers Association. I want, for a moment, to turn my attention to the possibility of a link-up between an estate agent and an insurance broker. This is not a rare occurrence. I suggest that in circumstances such as these we must be coming fairly close to the point when a small business man in this professional area will say that we are so regulating and controlling him that the game is hardly worth a light. If there is an insurance broker linked to an estate agent, he may very well in future choose to become registered under the Insurance Brokers (Registration) Act 1977. He may already have bad to acquire a licence as a credit broker or debt counsellor under the Consumer Credit Act. He may, under the prevention of fraud legislation, have to obtain a licence. Now, under this Bill, he has to obtain another licence. These piecemeal legislative developments have grown up over the years. It may be that this is one of the better arguments for some consolidating measure. Some insurance brokers are allied or linked with an estate agent, who is then disciplined by the Insurance Brokers Registration Council, the Department of Prices and Consumer Protection, the Office of Fair Trading and the Department of Trade. Now an additional arm is contemplated as a result of this legislation. I do not oppose greater control over the activities of estate agents. I am simply saying that if enterprise is to survive, if small businesses are to be encouraged, we must be careful. In my view, with this plethora of controls and supervision, we are bidding fair to reduce the number of people prepared to engage in estate agency. In so doing, we shall be reducing the service to the consumer. I end, as I began, by uttering my support for the principle of the Bill. I am, however, intent on defending the legitimate interests of estate agents, the vast majority of whom are honest and decent people who provide a good service to the community. The profession has been vilified because of the sins of a few. We have to make sure, as this legislation goes through Parliament, that the many are not put out of business because of a justifiable attempt to protect the public from the sins of the few.
I shall not keep the House long because practically everything that can be said on this subject has already been said and was probably said at even greater length last Session when a similar measure was before us. It is likely that we shall again hear the same objections as we heard on that occasion. I notice that the hon. Member for Faversham (Mr. Moate) is missing. No doubt he will be having another go at certain clauses.At the outset I must declare that I am a chartered surveyor. I have not practised or received any financial interest from estate agency or any work connected with the profession for nearly five years. Before I entered this House I earned a great deal more money than I have ever earned here—something like three times as much, I am ashamed to admit. In spite of the remarks of the hon. Member for Brentwood and Ongar (Mr. McCrindle), I cannot shed tears for the estate agents. I have noticed that a large number of agencies have been opening up in the past year or two and that they do not seem to be doing badly. Fresh branches are springing up everywhere. Although I accept the tone of the hon. Gentleman's argument, namely, that we must be careful not to impinge too much upon the small entrepreneur, it has to be said that at the moment returns are more than satisfactory. I cannot say that I felt sorry for the hon. Member for Birmingham, Stechford (Mr. MacKay), who has now left us. I cannot believe that his firm has not made a killing in the past 12 months. If it has not, it should not be in business. During that period house prices have shot up, with a consequent benefit for estate agents and solicitors. Someone in a local legal partnership told me that his firm had taken more in the first five months of this year than in the whole of the previous 12 months—a matter which was causing problems. I do not think that the profession is in a bad state. I welcome the Bill, which is long overdue. We have heard about the cost of buying and selling houses. This has long been a bone of contention for me. Although I was in the profession, I always felt that it was too complicated and expensive a process. When I last moved house—although I paid reduced fees—I had to pay my legal fees, a bridging loan to the bank, which charged me about 15 per cent., and then an arrangement fee, also charged by the bank. I do not know why Barclays thinks that it should charge such a fee. For the normal purchaser there are structural surveys to be paid for and there is the building society valuation fee. The other day I met a men who had spent more than £400 on structural surveys and valuation fees but had eventually lost the property. He was feeling pretty sore about that. We must deal with the problem of gazumping which has come to the fore in the past few years as a result of the huge increase in house prices. It is the duty of an estate agent to report an increased offer if he receives one. He cannot dodge the issue, but he always gets blamed. There have been periods when the situation was the other way round, when people were desperately trying to sell houses and would-be purchasers withdrew before contract. It is up to the professionals involved to get together, as Sir Desmond Heap suggested five or six years ago, and seek to devise a method which would overcome this problem. In Scotland a system is operated whereby the deal is binding once there has been an offer and an acceptance through an exchange of letters. Why cannot we have a three-week period embodying a conditional contract? Why is it not possible for someone to agree to purchase a property and then to know that the figure agreed will remain constant for the three weeks? The building society and the local authority would have a part to play in this type of arrangement. After the three-week period the deal is either confirmed or it is called off. In that period there should be no grounds which would allow others to step in and overbid. I cannot see why some simple form of conditional contract such as I have described cannot be entered into. I know the objection of the legal profession. It fears there will be some agents who will get people to sign contracts when certain conditions have not been met or other matters have not been dealt with. Perhaps, once this Bill is on the statute book, we can move towards that idea. There is also the question of estate agents taking a deposit. Much has been said about the difficulty which some agents may experience in becoming bonded. Why should estate agents take deposits anyway? When I was in practice I rarely did so. I used to tell people to wait until the exchange of contracts and to pay then. There is no need for agents to take deposits. We know why they do—because it is an easy way for them to get their commission. They deduct their money at the end of the day. Sometimes it can be difficult to get vendors to pay, and there may be some merit in that practice. One great omission is that the Bill does not extend beyond residential property. It does not include businesses. This is a pity because, in my view--and I have to be careful in choosing my words—some business transfer agents can be pretty fly. This is an area which ought to have been included in the Bill. I accept that we can certainly exclude the large commercial and industrial firms. I am not out to catch the Jones Lang Woottons and the Healey and Bakers of this world. But there are many small firms which should come within this legislation. I gather that consultation took place before the Bill was prepared, but it appears from some of its provisions that the professions will not be consulted before certain action is taken against some particular firm. I hope that that will not be the case and that the Department will agree to confer with the recognised bodies before the regulations are laid. Let me say to those agents who oppose this legislation that it is their own fault if they do not like the Bill. An estate agents' council was set up about 10 years ago. It was largely due to the lack of support from members of the profession that that arrangement fell to the ground. I believe that this legislation is a better way of achieving what everybody desires, and therefore I welcome the Bill.
I very much welcome the Bill. I regret that the Private Member's Bill introduced last Session by my hon. Friend the Member for Enfield, North (Mr. Davies) did not make more progress. Unfortunately, it was blocked by the action of some Opposition Members.I hope that when the Bill goes to Committee we shall build on the Committee proceedings that were undertaken on my hon. Friend's Bill rather than use the Committee stage on this legislation to re-run the same record. I hope that we shall make fairly rapid progress in Committee. Many hon. Members have said that the purchase of a house is often the largest single transaction that a person makes in his lifetime. It is odd that we have increasingly more careful restrictions on the way in which shopkeepers operate when selling relatively small items but that to date we have no regulations to control the activities of estate agents. This omission should have been put right many years ago. There are many limitations in the Bill, but I very much welcome its provisions as a whole. In my constituency there are a large number of owner-occupiers of the smaller type of house—the kind of house that attracts first-time buyers. Many would-be first-time buyers are put off when they come up against estate agents and solicitors, and, having made one attempt to purchase a house, they decide to give up altogether and not to return to the market. I am well aware that in my constituency there are some excellent estate agents who give a good service and take a great deal of trouble to guide first-time buyers through the labyrinth and to make sure that they get a good service, but the difficulty is that the first-time buyer rarely chooses his estate agent. Such buyers tend to choose the house and have to take with it the estate agent who is selling that property. Many of them find themselves having to do business with estate agents about whom they have heard alarming stories, which is unfortunate. In pledging my support for the Bill, I should like to ask the Minister how far some of these problems are met by the Bill's provisions. One major problem occurs when a house is up for sale in an area which has become blighted. Sometimes estate agents willingly put up a board outside a house indicating that it is for sale, put a price on the property, but fail to make clear to people coming to the office to buy it that the property is blighted. The person who is trying to sell the house finds that he receives many inquiries and intending purchasers ask for information about the property, but when they check on the property to see whether they can obtain a mortgage and make searches with the local authority they find that the property is blighted. Therefore, having initially had their hopes raised, they lose interest. One wonders why the estate agent at the very first stage of inquiry by the would-be purchaser did not make clear the type of blight that applied. Applicants could have been told that the house was being sold at a lower price because of the existence of that blight. Indeed, the estate agent could well have suggested how the interested person could get round the blight and, if everything failed, he could be given information on how to be rehoused by the local authority at some future date. However, agents do not give that information. One suspects that they are hoping that sooner or later some mug will turn up who will not carry out searches, who will not check up, but who will buy without having that information in his possession. I hope the Bill will make clear that, if a property is known to estate agents to be blighted, that should be made clear to anybody who inquires about the property. There is another problem that gives cause for concern. I refer to the case in which the estate agent and the builder of new property are often indistinguishable, or appear to be different, but in practice turn out to be the same. Many of my constituents have been frustrated by having been told that a new property will be available for occupation on a particular date, only to find that that information was based on good intentions on the part of the builder rather than on the practicalities of delivering the property on that date. I hope that under this legislation the two functions of acting as estate agent for a new estate and of building it will be clearly set out and separated. The next problem that has been experienced in Stockport recently is over a practice that can be described as rent and purchase. This appears to be an appalling practice in which none of the reputable estate agents is involved but which one or two people are beginning to develop. This practice involves renting out a house and sometimes telling people that they will be able to purchase at a future date. In one case those concerned were told that if they rented a property in the beginning they would at a future date be able to purchase a different property. This makes it difficult for the person renting the property to invoke the Rent Acts. It is made clear to those interested that if they invoke that legislation to protect themselves from high rents or to enforce minimum standards in building they will lose their opportunity to purchase the property when it has been improved. This is a bad practice because it takes advantage of the housing shortage in Stockport, and I hope that the Bill will go some way to stop it. During the summer many instances were reported to me involving another undesirable practice—that of contract racing. This is a deplorable practice, and I believe that there will be an opportunity in the regulations to make that practice illegal. This occurred in Stockport in two forms. In the first case, people were told that they were taking part in a contract race and could choose at the start whether they wished to participate. In the second case, however, people were not told that they were taking part in a contract race. As they were only told afterwards that they were participating in such a race, they lost all their expenses and money spent in drawing up the contract was wasted when it was discovered that others were competing against them. We must also consider the practice of gazumping—a practice that is not peculiar to Stockport. I am disappointed that the Bill provides no safeguards in that respect. It is odd that we have legislation to provide that where a shopkeeper offers a product for sale at a particular price, that contract must go through. The Government are taking steps to stop a seller putting a tin of corned beef on the shelf at 48p and a week or two later putting a new label on the tin with a price of 52p. If we can concern ourselves with people who overprice small items, should we not employ a similar process and insist that if a house is offered at a particular price, for at least a limited period the price is adhered to? That must avoid the practice of gazumping. The next problem has caused a great deal of distress to many of my constituents. I refer to people who have fallen behind on mortgage payments and who have then found that the building society has foreclosed and the property is being sold. They discover that the main interest of those who are seeking to foreclose is to recoup whatever money is outstanding on the mortgage, plus outstanding interest. Provided that that amount of money is recouped from the sale, the people concerned discover that that is the only interest on the part of those seeking to sell. Some properties appear to be on sale at considerably below market price and the new owner who takes on the house at that lower price demanded by the building society occupies it for only a short period—or perhaps does not occupy it at all—and sells a little later at a much higher price. In such a case the individual purchases that house at a lower price because it is badly cared for, but this practice gives the suspicion that the estate agent has sold the property on behalf of the building society to make a quick profit on it. I think I am right in saying that the Bill will make that practice illegal. I am concerned and a little disappointed that the legislation does not cover the sale of shops with residential accommodation, particularly where both the house and the good will of the shop are being sold. I have had several reports from people in Stockport who feel that they have been badly dealt with by estate agents who have either not secured a quick enough sale, and therefore the good will of the property has diminished during the period, or the two transactions—the selling of the property and the selling of the business—have not gone together. I had hoped that that Bill would cover that. One or two areas of the Bill concern me. To find out how effective the legislation will be, one has to consider the regulations which are to be made under the legislation. It is an unfortunate parliamentary practice that increasingly in legislation we say that we shall give the Minister powers to do something by regulation. In one part of the Bill we not only do that but we pass the powers on even further. One has the suspicion that the parliamentary draftmen work their way through a Bill, get to a point where it is a little difficult and say "Well, we will give them regulations to do this. We do not need to worry about that for another six or nine months". If we are doing some things by regulation, one of the basic needs of the Standing Committee considering the legislation is that it should have a model draft of the statutory instruments. I sit on the Select Committee which considers all the statutory instruments. It is amazing the number of times one sees statutory instruments which one feels the Standing Committee dealing with the Bill never envisaged at all. Because so much of the Bill will depend upon the regulations, I plead with the Minister to place draft regulations before the Committee when it is discussing the Bill, so that we can see the way in which those parts of the Bill which at the moment are only pious hopes will be carried out. Finally, I agree with my hon. Friend the Member for Ipswich (Mr. Weetch) that people are very concerned at the high cost of buying and selling property and that they very much want a simplified procedure. I realise that the Bill is only a very small step in that direction, but I greatly welcome it.
I congratulate the hon. Member for Stockport, North (Mr. Bennett) on highlighting many of the problems which exist for owners, occupiers and would-be purchasers of residential property. Some of us have had experiences similar to his own. My own judgment is that there will not be very much cover in the Bill for any of the matters that he listed. That is why I congratulate and support him in saying "Let us have a look at the regulations and the statutory instrument that will bring them to the fore as soon as we can during the Committee stage if that is at all possible".Why should the regulations have to wait to be drawn up? What are they expected to wait upon? What further information needs to be available to enable the regulations to be drafted? I cannot think that there could be any great difficulty in the way of their being prepared. I am sure the Minister will have taken a note of what has been said. I entirely recognise the need for a Bill to protect the public. I support the expression which the Consumers Association uses—that it is essentially a Bill for consumers. Reference has been made, in kind terms, to my efforts way back in 1966 to bring forward a quite major measure in this field. As the hon. Member for the Isle of Wight (Mr. Ross) said, we were to have an estate agents council. I think that we went very much further than the terms of this Bill, and that is one reason why I am critical of it. My knowledge and experience in these matters arises from the fact that I have practised as an estate agent with a small provincial practice in my home town of Bedford, and I have been a developer and a builder for that period of time. But I speak for no special interest. I have been approached by very few professional societies. In fact, the only one that I have heard from is the Corporation of Estate Agents. The name of that organisation has already been mentioned, and I have mentioned the Consumers Association. I am a member of the Incorporated Society of Valuers and Auctioneers, but I have had no representations from that society, so I cannot be accused of making any special pleas on its behalf. There have been individual representations, and I suppose that most of my colleagues have had some. I am concerned that we should have a measure such as this. My disappointment in the Bill as it is drafted stems from the fact that it should have gone very much further than it has and that it will not provide protection in the area where the public really need it. The holding of deposits is only part of the problem. I shall come to that matter in a moment. The Minister touched on the point about the restriction of the Bill to residential property. He has not given us any ground for refusing to include, for example, mixed hereditaments and shops or, indeed, industrial and commercial premises generally. It is not enough to say "Oh, we do not need to get involved in the big property transactions. They would not form any part of the purpose of the Bill in any case. The circumstances just would not arise". The hon. Member for the Isle of Wight mentioned business transfer agents. I am sure that those who are interested in going into business are those whom the Government want to protect. What about the self-employed? What about someone buying a small garage, or small business premises, or commercial or industrial property? Surely the protection which is being offered in the Bill to the purchaser of residential property would be equally valuable to those purchasers of property. The question of lost deposits is perhaps of more importance to someone who is buying property in which he intends to go into business than it is to someone occupying a house. It may affect his whole future level of earnings and the success or otherwise of his business. Therefore, I do not really accept what the Minister said in that regard. This issue was not mentioned in quite so much detail during the Second Reading of the measure introduced by the hon. Member for Ipswich (Mr. Weetch), but I should have thought that the Minister would have considered taking the matter further in this measure. I consider that all estate agents should be bonded, in whatever area of activity they are involved. We talked about the management of residential property when we discussed this matter previously in the House, and I think that all estate agents so designated should be bonded, irrespective of whether they elect to receive deposits on the transfer of property. What about the management of furnished premises? What about, let us say, a member of the Armed Forces who is posted abroad? Many of them let their houses furnished while they are on an overseas posting. Tens of thousands of people are in that position. Why should they not be protected under a measure such as this? It is a very narrow front which this Bill attacks, and there are many other aspects which could, I am sure, conveniently be brought within its compass. The question of bonding should be a prerequisite of being able to set up or continue in the business of an estate agent. I recognise the sensitivity of the Government—I share it myself—that we should not do anything to make the professional world of land and premises exclusive. I think that anyone, if he has the initiative and expertise, and if he can engender support for the services that he wishes to offer, should be allowed to open up in business. However, why should not all such people be bonded? Why should they not be required to find a bank, an insurance company or something acceptable by way of a guarantee that will be responsible for the loss of a person's money, in terms of buyers and sellers of property? I see no justification for the line that the Government are taking.
Will my hon. Friend give me the benefit of his advice, so that my own speech will be more accurate? How easy is it to get a bond for, say, £50,000 from a bank, if that is the kind of money that a smallish estate agent might need to cover deposits with which lie goes off to the South of France?
My hon. Friend is making the point for me. It would not cost my hon. Friend very much, with his record and his equity. He might get a bond for £1 a year. It depends upon one's substance. That cannot be in question. The bonding of people in business depends upon their reputation, experience and viability in financial and other terms.Why should not everyone who is handling the public's money be asked to pass that test? It applies in so many cases. Let us consider a building operation. If a building company gives a guarantee to the highway authority that it will finish some road works, the company goes to a bank or an insurance company and gets a bond for that. Why should not someone who is handling other people's money be asked to provide a bond of that sort? What it would cost would depend upon several things. If it is so costly that the person cannot afford it, he should not be in business. That is the acid test. It is not related to the professional societies at all. If a bank or an insurance company will not trust a person who wants to be an estate agent—that is what it amounts to—why should the Government allow that person to be trusted by the public? That is the acid test of bonding. It applies also in regard to professional negligence. I wonder how many members of the public have lost money because of the inadequacy of the advice that they have been given or because of the wrong advice. Let us imagine that an owner of a house says to an agent "What is my house worth?" If the agent undervalues the property, takes instructions as to its sale and sells it substantially below the market value, the owner has no recourse against the agent unless he takes him to court for professional negligence. The man may be worthless. It may not be worth while pursuing a claim for negligence if one has lost £1,000 or £2,000. Also, the agent may disappear overnight. The losses due to professional negligence are far greater than any losses through defalcation of deposit money. Here again, it is comparatively easy for any reasonable professional man to get a professional indemnity. My firm consists of two partners. I think I am right in saying that we pay £200 a year for a complete professional indemnity, which covers us for, I think, £150,000. Mine is a small, modest practice. Some of the practices in the City have indemnities running into millions of pounds. However, within the compass of the Bill, why should not every practising estate agent be required to be bonded against professional negligence? The case for that is irrefutable. It is not an expensive business. It would not involve the professional societies. The competence of the person to act as an agent would be judged by those prepared to enter into the guarantee. They would be the people making the judgments, not the professional societies or anyone else. If an agent cannot find someone to guarantee his professional competence, he should not be in business. That is the simple proposition that I put to the Government. It would include the principals and the staffs of offices. I know that the Bill covers them in some ways. But bonding against the misuse of moneys and against professional negligence would include partners, directors and their staffs. There are other aspects of the Bill—I criticised some aspects of the earlier Bill—to which we shall be drawing attention during the later stages of its passage through the House. As it stands, it serves a very restricted purpose. I regret to say that it has a number of undesirable features. In view of the Minister's speech, I have little hope that they will be rectified, however firm a case I make, due to the Minister's intransigence when the previous Bill was before the House. Although this is a minor piece of legislation and worth while in its way, it could be made so much more useful if the Government would be a little more receptive to the widespread criticisms of those who know something about the business. The Government are not taking much advice from them. I took particular note of the Minister's opening remarks, during which he said that the Government had the support of the professional bodies. From a reading of the press—that is the only source of my information—I know that there are major matters which the professional bodies wish to be included in the Bill and which the Minister, although he has said that he has their support, has not included. They would have liked the Bill to be drawn much wider. It is one thing to talk about constructive discussions, but I am doubtful whether, ultimately, many of the representations made by the professional societies and associations will be included. I see little hope for those that have been mentioned in the debate. I say that almost in despair. I hope that the Minister will think again on some of these questions.
Before commenting on the speech of the hon. Member for Daventry (Mr. Jones), I should like to pay tribute to my hon. Friend the Member for Stockport, North (Mr. Bennett) for the way in which he has examined the Bill and has suggested that certain changes should be made. He must have spent some time examining the Bill meticulously. I compliment on that. We appreciate the fact that he has gone through practically every line of it.I had the privilege of serving on the Standing Committee which considered the Private Member's Bill introduced by the hon. Member for Daventry in 1965 and on the Standing Committee which considered the previous Bill. The hon. Member's Bill was reaching a stage at which great argument was taking place on the question whether estate agents should be able to deal in property. The Bill had had a fairly easy passage until then, but then two Conservative Members tabled an amendment to the effect that no estate agent or member of an estate agent's family should engage in the buying and selling of property personally. There was great argument upon that matter. I well recall that some of us were thankful that a General Election was called, which meant that we did not have to continue with long hours of argument about it. To my own knowledge, the hon. Member for Daventry has for many years been an expert on these subjects. I pay great attention to what he says. The House must bear in mind that estate agents can be maligned. They often have to carry out unpleasant tasks on behalf of those who delegate to them certain jobs. The estate agent lies between the vendor and vendee. Unscrupulous estate agents are sometimes the vendor as well as being the agent. In other instances they are buying. That sort of practice has sometimes been carried out by estate agents who have been in business for many years and have never belonged to any association of estate agents. There are firms in South London that have been in business as estate agents for over 50 years and they are not members of any association. The other estate agents in the area are governed by a code of conduct because they belong to an association. They meet, they discuss and they decide what they can and cannot do. Very often they have rogue agents outside their organisation upon whom they can exert no pressure. That is because there are no regulations and no Act of Parliament controlling what takes place. It is necessary to place estate agents under stricter control. Does the Bill go far enough? In my opinion we want the same form of registration as we introduced for insurance brokers, or we want some form of licensing. Until we bring estate agents within a code of conduct, we shall be failing in our duty to both vendor and purchaser. It has rightly been said that for most people the buying and selling of their house is the most important set of financial transactions that they undertake. A couple buy a house, they live in it, and eventually they complete their mortgage. They may desire to move. Accordingly they visit an estate agent to ascertain what the house is worth as they wish to live elsewhere. A rogue estate agent is always susceptible to an easy touch If he comes across a seller who does not know the value of his house, he will sum him up very quickly. Such agents soon decide whether the seller knows anything about the business. If the rogue agent comes across a seller who is, as it were, unaware, he will say "Of course, sir, you can get £12,000 for it." The practice has been in the past—when I was selling insurance in Battersea people used to tell me about it—for the agent to send to the vendor so-called prospective purchasers who really had no intention of buying the house. They would inspect the house and say "I do not think that it is worth £12,000. I shall let you know." When two or three so-called prospective purchasers had visited the house of, if one likes, the simpleton, he would become downhearted. He would visit the estate agent and the agent would tell him "You have heard all these people say that the house is not worth the sum that you are asking. Luckily, I know someone who is prepared to offer you cash. They are prepared to offer you £10,000." The seller would jump at the chance and so the house would be sold for £10,000 cash. He would be selling it to someone in a finance company of which the estate agent was part and parcel.
I hope that the hon Gentleman agrees that that arrangement would be covered by the professional bonding that I am proposing.
I am glad to hear that suggestion coming from the hon. Gentleman.To revert to my example, the finance company would put the house on the market for £20,000 and sell it for that sum. I am talking about present-day prices, but I know that such instances took place a number of years ago. It is essential that reputable estate agents —over 90 per cent. of agents—should be protected against the activities of rogue agents, many of whom have been in business for many years. I agree with bonding. I agree with separate accounts for clients' money. The hon. Member for Harrow, West (Mr. Page) introduced in his Bill separate accounts for clients' money for solicitors. That was accepted by the House. There is sometimes negligence on the part of the agent. It may be that he is extremely busy, or that he does not understand that he has to get as much as he can for a house. Is it the job of the agent to get as much as he can for the vendor, or is it his task to get the house as cheaply as possible for the would-be purchaser? The agent is the link between vendor and purchaser. If a purchaser goes to an estate agent to buy a house, the agent will supply him with information on houses at a certain price. I am glad that the hon. Member for Birmingham, Stechford (Mr. MacKay)—no doubt the practice exists in Birmingham as in London—referred to gazumping. Recent examples have come to my attention. Only this weekend someone consulted me who had visited an estate agent and had been given details of a house to buy. The price was £18,000. He viewed it with his wife. His wife liked it and they intended to buy it. They are would-be first-time buyers. They returned to the agent and told him of their decision. When they visited the agent the following week, he told them "I am sorry, but there was a previous prospective buyer. A young couple viewed the house and made an offer before you appeared on the scene. I have had to offer the house to them. However, if you wish to pay an additional £500 I shall let you have the house." The young couple, to their credit, said that they would not like that to happen to them. They explained that they would not like to be gazumped for £500. They told the agent that they did not want anything more to do with the house. That is an example of an agent trying to get £500 more from a young couple when young couples in London and the South-East are desperate to obtain a house. Unfortunately, that is not a rarity. That is a practice that is going on in London, especially with the most desirable properties, three-bedroomed semi-detached houses. They are few and far between in London and, no doubt, in Birmingham. In inner London such properties are extremely difficult to find. I referred to £18.000, but today such houses are being sold for £27,000. That is an example of the problem that we are meeting all the time. I was glad to hear the comments made by several of my hon. Friends and some Conservative Members about business properties. Sometimes the small business man is more at the mercy of the business transfer agent than would-be purchasers of residential property who deal with an estate agent. It was suggested that business transfer agents should be brought within the orbit of the Bill. I realise that there is a distinction between business premises and residential property. During the week I was seen in this place by someone who told me that the estate agent was having to do the dirty work for the Church Commissioners. His rent is to be increased from £1,750 a year to £12,000. He can do nothing about it. The property is a hairdressing establishment in Jermyn Street. How is that establishment to meet such an enormous increase in rent? The estate agent is in the middle. He has had to convey the information to the hairdressing establishment. What sort of problem is that for the agent? The agent has to do the dirty work for the Church Commissioners. That happens in many cases. The job of an estate agent is not only to act as the link between a seller and a purchaser; he often has to collect rents from properties and see to repairs. If a recalcitrant owner does not want to do the repairs too quickly, the estate agent takes the stick. Let us pay a few compliments to the estate agent who does his job properly, acts as the agent for the vendor and tries to ensure that the purchaser of a property gets a square deal. There is no doubt that we have needed legislation in this area for a long time. It is a question not just of consumer protection but of protection for the vendor to ensure that he gets the right price for his house, though I do not know how that can be incorporated into the Bill. The Bill has been a long time coming and I am glad to see that there are still some hon. Members here who served on the Committees on the previous two Bills. I do not know whether any hon. Member served on the Committee on the 1890 Bill, though my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman) may have done so. I ought to tell hon. Members that I told my hon. and learned Friend that I was going to say that; I am sure that he will not mind. I was pleased to serve on the previous two Committees. We did not get anywhere then, but I hope that we get somewhere this time.
It is a pleasure and delight to follow the hon. Member for Battersea, South (Mr. Perry), who so generously, wisely and helpfully sponsored my Private Member's Bill—the Insurance Brokers Registration Bill—which I introduced the year before last. The hon. Gentleman made a number of the points that I was going to make.I agree with the hon. Gentleman that a great opportunity has been missed to incorporate in this measure many of the ideas that we had in my Bill. It is a pity that this measure is not being produced by the Department of Trade. In view of the discussions and consultations that took place over my Bill, I believe that if this measure were being handled by the Department of Trade it would be substantially different. The Bill provides a perfect opportunity for a degree of self-regulation by an industry which understands itself. I do not believe that the Director General of Fair Trading is the right man to interfere in the running of an industry and tell it in so many ways how it ought to operate. It would have been better to lay down the objectives of the Bill, including provision for a code of conduct. As my hon. Friend the Member for Daventry (Mr. Jones), who always speaks with such knowledge and authority, suggested, there must have been advice that bonding should apply to all people practising as estate agents. That seems so self-evident that I do not believe that if wider consultations had taken place with the industry that conclusion could have been avoided. I support the objective behind the Bill to quite an extent, but I am critical of the way in which it has been drafted and presented. Unless I have missed it, there is no obligation on the Department or the Director General to consult the industry. The Minister said that the industry welcomed the Bill. I wonder whether it welcomed some Bill, without so much welcoming this Bill. My information is that there is a great deal of criticism of it. My only experience of these matters comes from my constituency. The Minister may prove me wrong if he has done his homework as well as he usually does, but I suspect that my constituency has more privately owned homes than any other. The sensible responsible people who live there are a mirror image of the homes in which they live and which they respect and love so much. There roust be many property transactions in my constituency, but in 17 years as an hon. Member of this House I have had n) complaints about the activities of estate agents acting for themselves. The only complaints that I have received have been about estate agents acting for another party. I have a constant battle with people acting as agents for groups of flats in Alexandra Avenue in my constituency, but this is the fault of the owners more than the agents—unless the agents were to decide that they do not wish to carry out the orders of the owners. In addition to the large number of privately owned homes, my constituency includes a fair number of smaller shops. It is beyond me why small commercial properties are not included in the Bill. If the Bill is not to be all-embracing, why not at least include small commercial properties? If the Bill goes through unamended, a bankrupt, sex-discriminating ex-convict could sell a corner newsagent's shop to the blind widow of a clergyman, but he would not be allowed to sell a £250,000 property in Ascot to an oil sheikh. That seems to be absolutely crazy. Perhaps in Committee we can attempt to improve the Bill by including commercial properties up to a value of, say, £75,000 or £100,000. That would go some way towards making the Bill realistic if we are trying to protect those who are less able to protect themselves. The main complaint of my constituents involved in house purchase is gazumping —up and down. I do not know the answer to this problem, but I have a feeling that we might be able to work out a method by which a non-returnable deposit could be put down by a prospective purchaser to bind a seller to sell at a particular price. If the purchaser pulled out for certain reasons, he would have to forfeit his deposit. I should also like to see protection for the person selling a house who gets a long way towards buying another house and finds that at the last moment the purchaser of his own property says that he cannot raise the money and offers £1,000 less than the agreed purchase price. There may be no reason for that, other than that the buyer knows that the seller is so committed that he will probably have to go ahead with the sale. I believe that controlling such practices would be more useful than what is proposed in some other parts of the Bill. I welcome the Bill as an opportunity to try to improve those parts of estate agents' work which should be improved but which are not covered by the Bill. I hope that such amendments can be included during the passage of the Bill.
I declare an interest since I am a surveyor, valuer and estate agent. Some hon. Members present were fortunate to be on the Standing Committee which considered the Private Member's Bill last Session. It is sad that today we are discussing many of the matters that we discussed last Session. We do not appear to have learned anything from our deliberations.We have heard today that those people who wish to acquire businesses are not protected because business transfer agents do not come under the bonding of the Bill. Small shops often have living accommodation above them. The type of person who acquires a small corner shop often wishes to buy it not mainly for the livelihood that he will earn from the shop premises but for the living accommodation.
When the living accommodation is a substantial part of the premises, it is covered by the Bill.
Perhaps the Minister could explain what "substantial" means. It is not clear to me.I am anxious about other spheres covered by the Bill. I thank the hon. Member for Battersea, South (Mr. Perry) for his compliments to agents who have the dirty work to do in property management and other areas. Many estate agents manage property. They let both furnished and unfurnished property. They often take substantial deposits. Are such deposits covered for bonding in the Bill? If they are not, they should be. Many accommodation bureaux and others let property and they should be covered. Many people have told me that they have lost their deposits. We should examine the possibility of covering that type of transaction. My hon. Friend the Member for Daventry (Mr. Jones) was right in what he said about professional indemnity. The public should be protected by professional indemnity. My hon. Friend is right to say that anyone can set up as an estate agent and advise people on the price that they should charge for their property. That is why there should be proper professional indemnity in order to protect the public. Even with the proposed bonding, the public will not be protected in certain areas. It is sad that we have waited so long for a Bill which will protect the public and yet which does not go far enough to protect them. Many Labour Members had the impression during the Committee on the Private Member's Bill that some of us were trying to block the Bill. I wish to be categoric about this matter. Some of us did try to block the Bill, not because we do not believe in bonding, nor because we do not wish to see the estate agents' profession made safe for the general public. We did not like certain parts of the Bill. Some of the provisions have been amended and are now much better. However, I am still not happy with some provisions. I am not happy about the sex and race discrimination parts of the Bill. It is extraordinary that one area should be singled out for this treatment. Is it the beginning of the thin edge of the wedge?
It is not the thin edge of the wedge. It is a replica of a principle introduced by the present Shadow Chancellor of the Exchequer in the Consumer Credit Act 1973.
But the principle is not contained in all the Bills which have been passed since then in which consumer credit is involved. Under the Bill, not only can a person be charged under the sex and race discrimination measures but he can be prevented from trading. Is it right that somebody should receive double punishment for one offence? I should argue in the same way about any Bill. I am not against bonding in any shape or form, and I wish to see the profession improved, but there are certain political areas of the Bill which I and many of my colleagues find unacceptable.
Was sex and race discrimination included in the insurance brokers measure?
So far as I am aware it was not included in that measure. Perhaps the Minister would answer that question later.We welcome the provision for clients' accounts. Any self-respecting business should have such accounts. However, a small firm which does not have a large staff might find it difficult to cope with having to give back interest on deposits. This will involve an incredible amount of book work. I am an estate agent in a small firm and I would not wish to take deposits because they would cause me so much work and involvement that I should be happy for a solicitor to take the deposits. There are problems involved in the bonding. That is the sad part. Three or four months have elapsed since the summer and we have not had a reassurance from the Minister that there have been discussions with insurance companies. How are we to know that estate agents will be able to achieve a reasonable rate for the insurance which they will require? I wait with interest to hear the Minister's remarks about that. I am not against the Bill. In principle, I support it. But I am still unhappy about certain areas. I believe that the Bill introduces a type of legislation which we have not seen before. The House should be aware of its political consequences.
It is obvious from the comments that have been made during the debate that although the Bill has been given a general welcome there are many matters which are exercising hon. Members on each side of the House. This suggests that the Committee stage will, to say the least, be extremely interesting. As it is a non-contentious measure, I am sure hon. Members will hope that the Government will look kindly upon such amendments as are moved.It is always refreshing to have a debate on a Bill that is not contentious and is not ideological in content. One has to exempt the hon. Member for Enfield, North (Mr. Davies), who, having mentioned the question of ideology, made, I felt, the only ideological speech in the debate. It is worth repeating that the vast majority of estate agents feel strongly that those incidents of fraud and malpractice which have damaged the reputation of estate agents generally must be stamped out. It is in that context that the Bill has been welcomed in the country as well as in the House. Many serious questions will arise in Committee. There are, for example, the difficulties of distinguishing between residential and commercial estate agency work. It is rather theoretical and must cause confusion when agents are involved in both kinds of activities. There is also the problem which arises under clause 3, which suggests that estate agents could be doubly punished for any offence involving racial or sex discrimination. Several hon. Members have mentioned this. It has been described as double jeopardy, but I am not sure that it is correct to put the responsibility or onus on estate agents. I take the view that the decision about who shall purchase the property is made by the owner. The estate agent can tell the owner what offers he has received, but the final word is with the owner of the property. I am not at all sure, therefore, that it is fair to put the onus on the estate agent. There is also the question of what local authorities may feel about their ability to police these measures. The hon. Member for Ipswich (Mr. Weetch) and other hon. Members argued that the Government should lay down standards and qualifications for the profession. I take the view that, whereas the Government can determine the rules under which estate agents may conduct their business, entry qualifications must be a matter for the estate agents themselves. I think that this argument applies to any professional body. In any case, the question of competence —this was also raised by the hon. Member for Enfield, North—is not one on which we can legislate. I do not see how we can legislate to make sure that all solicitors, accountants, doctors or estate agents are competent. What we can do is to try to ensure that the rules under which they conduct their profession or business are as fair as possible to those who use their services. My hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) pleaded that gazumping should be made illegal. I know that the Law Commission, in examining this question, seemed to think that this was impossible and that it would produce no solution. Clearly, this question will be very much in the minds of hon. Members in Committee. But, as the hon. Member for the Isle of Wight (Mr. Ross) pointed out, it is not a problem in Scotland. Hon. Members would be well advised to look again—if they have not already done so—at the reason why gazumping is not a problem in Scotland. As soon as an offer is made by a solicitor or an estate agent to an agent looking after the interests of the vendor of the property and it is accepted in writing—this usually takes place within a matter of hours—the offer is binding on both parties. Either side may sue for damages if the other tries to withdraw. Most property matters in Scotland are handled by solicitors. Usually they are dealt with on the telephone by the solicitors for each side, and letters follow immediately. There is no reason why estate agents in England should not operate in a similar way. No doubt some of them do. The fact that it can be done in a matter of hours certainly removes the terrible problem of gazumping. I am sure that on this occasion, Mr. Deputy Speaker, you will allow yourself to agree with me that our colleagues who represent English constituencies might profit by considering this well-tried Scottish procedure. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) was right to remind us that insurance cover is not easy to obtain. He has, as he told the House, a great deal of experience in that business. The matter of insurance cover must not be allowed to be an impossible hurdle, particularly for the smaller firms. The hon. Member for Stockport, North (Mr. Bennett) had the agreement of all Conservative Members and, I believe, of Labour Back Benchers when he called, quite rightly, for model draft regulations to be available to the Committee when it is considering the Bill. When we consider the various powers which are being reserved in the Bill for Ministers, it appears that we are giving at least a partial blank cheque to the Executive. Therefore, I feel that we ought to have some indication, in model form at least, of the intentions of the Government. My hon. Friend the Member for Daventry (Mr. Jones) spoke from his wide experience of property transactions. He was right to ask that commercial property should be included if only—as he and other hon. Members said—to benefit small businesses. He was particularly right to say that the problem of clients' losses from professional negligence is a much greater threat to the consumer—and a much greater cause for concern to those of us who are considering legislation of this kind—than is the occasional theft of deposits by estate agents and other people. The hon. Member for Battersea, South (Mr. Perry) asked for whom the estate agent works. It may be my Scottish instinct, but if I were an estate agent I would work for the man who was paying my fee. I think that most estate agents consider that that is where their first responsibility lies. There are several points which relate to some of what I might call the Scottish aspects of the Bill and I should like to mention them to the Minister. I am glad to see the Lord Advocate in his place, listening with great attention to the debate. I am happy that the Bill should apply to Scotland, although, as I have indicated, the activities of estate agents there in regard to residential property have not been very great in the past. I believe that their role in Scotland is expanding. As I have already mentioned, most buying and selling of residential property in Scotland is done by solicitors, and these gentlemen are, of course, excluded from the Bill. The Bill distinguishes, where necessary, between Scots and English law. These differences will be examined in Committee. I am sure that the Lord Advocate has studied all these matters very carefully and that we shall not find any fault in the distinctions drawn in this respect in the Bill. I ask the Minister of State to give consideration to clause 35, to which he referred in his opening speech, which amends the Scotland Act 1978 so as to make the activities of estate agents a devolved matter. I can understand how the Government reached the decision that the Estate Agents Act 1979, as we expect it will become, should be a devolved matter and should therefore be taken as if it were enacted before the Scotland Act 1978. I think the Government must have reached that conclusion because estate agents are involved with housing and that as housing is a devolved subject the activities of estate agents should also be devolved. I suggest to the Minister of State that that would be a mistake, and that what we are dealing with today, first and foremost, is consumer protection, which is not a devolved subject. Schedule 10 to the Scotland Act specifically excludes, for example, the Protection of Depositors Act 1963, the Trade Descriptions Act 1968, the Fair Trading Act 1973 and the Consumer Credit Act 1974. I think that we should be putting the Bill in the wrong pigeon-hole if we looked at the subject from a housing point of view and devolved it instead of keeping it with those non-devolved subjects under the title of consumer protection. The Minister said that there was no cross-border trade in the subject covered by the Bill. Presumably that is why the Government did not devolve consumer protection legislation. I suggest that it is important that standards and practices of this kind should be carried out on a United Kingdom basis. It is a fact that Scots buy property in England and sell it from Scotland and vice versa. If this were a devolved subject, we would immediately run into the possibility of different sets of rules on one aspect of the consumer credit legislation. This matter is important, and I hope that the Minister will consider it carefully. I hope, too, that he will at least refer to it in his winding-up speech so that we can consider it carefully in Committee.
I do not know whether the hon. Gentleman is leaving the point that he made about clause 35 and is going on to another matter, but it might be convenient if I intervene briefly. I should point out that it is a question not simply of group 4, housing, but of land use, group 6 and, under a subsequent group—
Group 24, conveyancing.
—conveyancing, which is group 24. Bearing in mind all those factors, it seems obvious that, as a policy decision, the substance of the Bill ought to be a devolved matter. That is a, matter not of law but of judgment, whether it is right or wrong. I think that the ground is clear from the drafting of the Bill. In clause 35 the hon. Gentleman will see that the entry which is to be added to the Scotland Act is "The Estate Agents Act" optimistically "1979". It states:
That reflects the United Kingdom consumer interest."Included, except so far as relates to fees paid or to be paid to the Director-General of Fair Trading."
It also reflects a number of other matters. Under an Assembly, revenue of this kind would still be paid to the Exchequer. I agree with the Lord Advocate that it is a matter of judgment. It has been a difficult decision to make. However, I ask the Minister and the Lord Advocate to consider further the fact that we are, first and foremost, talking about consumer protection.I think that we shall have many difficulties with almost every Bill of a United Kingdom nature because of the absurd terms of the Scotland Act 1978. Every time that we examine a piece of United Kingdom legislation from now on, we shall be amending the constitution. That is the difficulty facing us. There will be times when the constitutional argument, whatever the subject of a Bill, will overshadow the merits of the Bill and cause more disharmony in the House. I do not think that anyone who looks for good government of the United Kingdom would argue that there should be more disagreement across the Floor of the House, but that is one of the difficulties of devolution. I do not want to press that matter any further. My final point relates to housing in Scotland. The importance of the Bill from a Scottish viewpoint relates not only to devolution but to the urgent need for a rapid expansion of owner-occupation in Scotland. There are fewer owner-occupiers in Scotland than in any other country in Western Europe. Indeed, some countries east of the Iron Curtain have a higher proportion of owner-occupiers than one finds in Scotland. For Scotland the figure is only 34 per cent. For England it is 55 per cent. I think that both council tenants, who look forward to the next Conservative Government giving them an opportunity to buy their own properties, and the building industry will welcome the drive to which we have committed ourselves to increase tremendously the amount of owner-occupation in Scotland. I wish that the Labour Party shared that commitment with us, because I believe that it is in the best interests of the country that there should be a rapid expansion of owner-occupation in Scotland.
I am sure that the hon. Gentleman wants to be fair. Is it not a fact that the greatest increase in owner-occupation in the United Kingdom took place between 1964 and 1970?
Yes. I noticed that the hon. Gentleman qualified his intervention by saying "in the United Kingdom." That may be the situation in the United Kingdom, but it certainly is not in Scotland. That important point should interest all hon. Members.I have already said that the principle of the Bill is not contentious. Therefore, we have every reason to hope that the Minister will look kindly on amendments which may be tabled in Committee. It is in that spirit that we look forward to what the Minister has to say, because that may set the tone for the attitude that he will take in Committee.
With the leave of the House, Mr. Deputy Speaker, I respond to the hon. Member for Edinburgh, North (Mr. Fletcher) by saying that anyone who has served on a Committee when I have been the Minister concerned knows that I am extremely co-operative and receptive and that I do everything possible to accommodate the legitimate and valid amendments tabled by hon. Members. I do not mean that lightly. I hope that the changes that we have made in this Bill, compared with the Bill which went through Committee in the last Session, are some indication of that constructive attitude.Part of the debate has been not about the Bill— make no complaint about that—but about the cost, the delay and the whole system of conveyancing and house transfer. People are right to be concerned about the cost, the time and the number of institutions with which they must be concerned if they wish to transfer houses. I suspect that part of the cause of gazumping is the delay which can take place between deciding to purchase a house and the signing of the contract. I shall say more about gazumping later. We cannot simply take the symptom of gazumping and cure it without looking at some of the underlying causes for it. It was suggested that we should look at the whole system of conveyancing. A Royal Commission is inquiring into the legal profession. I am sure that Royal Commission will have something to say about the organisation of the profession and the conveyancing monopoly of solicitors. As far as I know, the Royal Commission has not yet come to any conclusions. However, that matter is within the remit of the Royal Commission and no doubt we shall have its views in due course. On the cost of conveyancing, I am glad that the hon. Member for Birmingham, Stechford (Mr. MacKay) welcomed the reference to the Price Commission. Although the Conservative Party is against the Price Commission in general, certain references to the Price Commission and concern about prices in particular have its support. I am sure that the Price Commission will be able to throw some light on the activities of agents. Concerning the point made by the hon. Member for Antrim, South (Mr. Molyneaux), I am not sure that it would be within the Price Commission's remit —indeed, the remit has not yet been published—to look at the arrangements regarding who pays and whether both parties should pay the agent. The Price Commission is entirely independent: it is not influenced in the least by the Government. Therefore, if hon. Members, their constituents or organisations have views about the ways in which estate agents' costs and charges are calculated and about the proficiency of the profession, I hope that they will not fail to make their representations or supply any necessary evidence to the Price Commission. One hon. Member warned that the Bill would not end all risks. That is absolutely right. The purchasers and vendors of houses will not be able to rest all their confidence and faith in a modest Estate Agents Bill. They will still need care and advice. They will need legal and other guidance about surveys and valuations. The Bill will not remove all the attendant risks of buying and selling a house. I do not wish to give the impression that it will. It lays down a number of minimum requirements that I think will improve the protection of house purchasers and vendors. That brings me to the onslaught on the Bill made by the hon. Member for Daventry (Mr. Jones), who said, as he did on the last occasion, that the Bill did not go far enough. In the present atmosphere it is odd that here stands a Socialist Minister putting forward a Bill for the protection of consumers and being accused by the hon. Gentleman and others of not legislating enough, of not controlling every possible aspect of estate agency and the transfer of property. I plead guilty to that charge. I believe that I must have a priority. I believe it right that I should restrict to the absolute minimum legislative interference with the activities of the profession. I think that I am right to legislate to deal with those who are most vulnerable, the buyers and sellers of houses. Without broad support from the professions, the country and the House for much wider legislation, it would be wrong for the Government to intervene. Most of the criticism we receive in our Department—and I am sure that this applies to other Departments as well—is that we legislate too much. I do not pass an opinion on that, but I shall certainly not have the charge levied against me on this occasion unless there is wide support for an extension of the principle of the Bill.
Is there not support from the professional associations for the bonding, not in professional terms but in financial terms, of all those practicising as estate agents? The societies bond all their members. Surely they are advocating to the Government that all estate agents should be bonded. That is one of my principal aims.
That correctly represents their view. In an ideal world, I should like to see universal bonding, and not only for estate agents. Time and again in my consumer protection functions I come across situations in which bonding and the keeping of clients' accounts or clients' money would have prevented disasters. The proposition has been put to me in relation to some aspects of the travel industry and some overseas removers. There have been tragic instances of people who paid a deposit for the shipment of their goods to the West Indies, Australia, Canada, New Zealand or wherever and then found not only that the overseas remover had gone out of business but that the money paid for payment on to the shipper had disappeared.A universal bonding arrangement for that profession would be desirable, and the same is true of some aspects of the travel trade. The difficulty is that a universal bonding arrangement of that sort might put people out of business. Most Governments shy away from bringing to an end a business that has been honestly and reputably carried on, whether by an overseas remover, a travel agent or anyone else. That is the problem we face with the Bill. There are people in business who are not bonded and who may not be willing, for reasons of religious objection, to obtain bonds. I think that we have adequately dealt with that by providing in the Bill that we can debar people from taking deposits, and those who are not allowed to take deposits and do not take them will not need a bond. Apart from that exemption, largely designed to deal with those with religious objections, there will be universal bonding for residential transactions as a result of the passage of the Bill.
I make the point that I tried to make in my speech. Should people expect the public to trust them if they cannot be trusted by someone who is not prepared to bond them? Where does the judgment rest? The Government are saying that the public must trust an agent who cannot find someone to bond him at a reasonable price.
What I am saying is that if an agent cannot obtain a bond or cannot participate in an indemnity scheme, he should not be able to take a deposit. I think that we have agreement on that.
He should not be in business at all.
I think that it is going a little too far to say that. If he carries on a business but does not solicit, and does not receive, the public's money, it is a great invasion of his right to carry on a business to debar him from being in business even though he does not accept any position of trust in relation to the public's money.I think that that is a reasonable compromise. It certainly accommodates the views of many of those with religious objections to taking part in bonding or in an indemnity scheme. I hope that I do not get run over by one of those people, because presumably they cannot take out third party insurance. At any rate, the Bill deals with the problem of those who have that objection. We should be particularly careful to accommodate their views, because they are in business now. If we were making an entirely new rule for an entirely new activity, I think that it would be fair enough to have universality. But as there are such people who have been in business for a long time without the necessity for a bond, and who are willing to carry on in business without taking deposits, I think that it is fair to say "Provided you do not take money, you will not have to have a bond or take part in an indemnity scheme".
I accept the Minister's line, but what I think the hon. Member for Daventry (Mr. Jones) would like to see, and what I should like to see, is the extension of this principle. After all, why are we encouraging firms to take deposits? It is only an act of faith. It is meaningless until contracts are exchanged, and in any case the money should be put on deposit at the bank, gaining interest. There is then the argument as to who receives the interest, but lawyers can sort that out. Why do we encourage the paying of deposits in the first place? What I should like to see, and what other hon. Members throughout the House would probably like to see, is the extension of the principle beyond the role of the residential agent. The business transfer agent must surely be included in the bonding.
If hon. Members would care to send me a petition asking me to seek powers to impose universal bonding, not only for transfers of residential accommodation but more generally, I should be delighted to show that to some of my colleagues in the Government to demonstrate that those much wider enabling powers are necessary and desirable. But, in a real world, one must restrict oneself to a particular cause of mischief.We cover the sales of residential property. I have said that the definition in the Bill includes the mixed hereditament—the newsagent's shop in Harrow with the flat above it, or the garage with the adjoining house. So far we have the virtual unanimity of consumers and the professions that those are the areas that need to be covered. If there is a universal demand for much wider coverage, that needs to be the subject of a separate Bill and separate consultations. Hon. Members are making the best the enemy of the good. I turn to another point about bonding. I was told that we had done nothing about consultations with insurance companies. In fact, my Department has had three meetings with representatives of leading insurance companies and Lloyd's since the Bill was last discussed in the House, and the companies stand ready in principle to cover all the requirements of the Bill. Only technical requirements now need to be discussed. That brings up to date the report that my hon. Friend the Member for Enfield, North (Mr. Davies) gave to the House or the Committee when this point was raised on previous occasions. One criticism made by the hon. Member for Romford (Mr. Neubert) was that the enabling clauses were far too wide and that the Bill was not limited and specific enough. I offer two answers, the first being in three parts. First, there is adequate precedent for enabling powers to make regulations. Secondly, the regulations are always subject to consultation under clause 30. Thirdly, they are subject to parliamentary control. That is one answer. The second answer is that there are plenty of precedents. There are, for instance, the rules of court. We can make rules here for appeals. But the rules of the Supreme Court are made under delegated powers. I do not think that they even come before this House. All one's experience is that one needs to have fairly broad regulation-making powers in order to deal with those matters which we cannot anticipate at present. Trading practices change. Perhaps I may take the example offered by the hon. Member for Stechford. It may become a widespread practice for agents to persuade vendors by subterfuge to sign sole agency agreements which are oppressive, harsh and unconscionable. I do not think it is a widespread practice at the moment, but let us assume for the sake of argument that it becomes a widespread practice in 10 or 15 years. In my view, if we are to have adequate consumer protection legislation, we must have a sufficient degree of flexibility in our regulation-making powers to anticipate those difficulties in the future. That is exactly the problem that we had about pyramid selling. We did not have adequate regulation-making powers in previous statutes dealing with consumer protection. When widespread abuse which was condemned by almost every hon. Member occurred, we did not have the power to deal with it. To their credit, the last Conservative Government produced the Fair Trading Act which gave that degree of flexibility. My second defence to the charge of having broad enabling powers, therefore, is that it is the only way in which abuses can be dealt with as they arise—subject to consultation and subject to parliamentary control—without having to come back to this House for primary legislation. Of course, we want to involve hon. Members in the construction of regulations. This deals with the matter raised by my hon. Friend the Member for Stockport, North (Mr. Bennett). In my view, Ministers are not given enough regulation-making powers. On the other hand, Members of Parliament are not involved enough in the policy-making process which takes place before a regulation is presented to the House. I am perfectly willing to have meetings with any group of hon. Members who want to discuss with me the kinds of powers which will be exercised and the kind of policy that will be followed before any regulations are made. But I have a statutory duty to ensure that there is adequate consultation with the professions, consumers and anyone else whom we think fit, and, as always, those powers will be exercised by my Department to the full.
When the Standing Committee is considering this matter, will my hon. Friend consider putting before it the set of model rules to the extent that they cover the points which the Department now envisages are necessary? I can see that we cannot consider a statutory instrument which may be necessary to anticipate future events. However, in considering this matter I think that it will help the Committee a great deal if it can see the instrument which the Minister would like to make at present.
I cannot promise as much as that. However, when we come to the appropriate clauses, I shall try to give the Committee as full an account as possible of the kinds of regulations which I envisage. I cannot go further than that, but I shall try to be as informative as possible.Regulation-making powers deal with appeals, and I was asked especially about the sort of people who would hear appeals. As I said on the last occasion, there is a precedent, and I hope that it is a reassuring one. I refer, of course, to the Consumer Credit Act, where an appeals panel was set up comprising a legally qualified chairman and, as assessors or aides to the chairmen of appeals panels, those with experience not simply in consumer credit but in a wide area of business. Obviously the experience of those who engage in estate agency work will be of great importance in assessing the criteria for appeals, and it is our intention to recognise this in considering who should be appointed to the appellate bodies. The hon. Member for Antrim, South asked me about appeals from the Northern Ireland Department of Commerce—in effect, the Secretary of State for Northern Ireland—to the Secretary of State for Prices and Consumer Protection. That is a misunderstanding. Although the enforcement authority is the Northern Ireland trading standards officers who are responsible to the Department of Commerce, and although they enforce and inspect and would report matters to the Director General of Fair Trading, they have no power and nor does the Northern Ireland Department to apply the sanctions and clauses 3 to 6. That would be done only by the Director General of Fair Trading, and the appeal would lie from the Director General to the Secretary of State for Prices and Consumer Protection. I should make it clear that trading standards officers in Northern Ireland have always been responsible to the Secretary of State and previously to the Government of Northern Ireland, and it is not a matter which in Northern Ireland has been devolved upon local authorities. Therefore, direct rule ha's made no material difference in that respect.
I am grateful for the Minister's explanation. Are we to take it, therefore, that the mention of the Department of Commerce for Northern Ireland is not made in the sense of a reference to a Department of the Government but is simply thinking in terms of a section of the Department of Commerce?
I think that the words "Department of Commerce" accurately reflect the position of the enforcement officers and the responsibilities of trading standards officers that has always existed. I think that is why the phrase "Secretary of State for Northern Ireland" is not used.
I apologise for interrupting the hon. Member, especially as I was not able to hear the earlier part of his speech. Will he explain why it is that in Great Britain we never in these circumstances use in a statute the designation of a Department other than the Treasury, which is not a Department but is the Lords Commissioners, whereas in the Bill we specify a Department as the enforcing authority? Nor does there seem to be any parallelism between local authorities and the Department of Commerce. I apologise for following up the point, but the Minister will appreciate the importance of it
I hope that I can answer the right hon. Gentleman's point, although I thought that I had already made it to the hon. Member for Antrim, South. If it were in the rest of the United Kingdom, we would refer to a local authority which is the enforcement authority for this kind of consumer protection legislation. In Northern Ireland, the enforcement authority for consumer protection legislation has always been the Department of Commerce, to which trading standards officers are responsible. It is really analogous to a description of a local authority for the rest of the United Kingdom.
In that case, it is the Secretary of State in Northern Ireland who must take responsibility for the enforcement, since he is wholly responsible for all that the Department of Commerce does.
I believe that to be true.The powers of entry have been attacked. We discussed this matter on the last occasion, and I have no doubt that we shall discuss it again. All that I emphasise is that there is not the introduction of an entirely new power here. The powers of entry and enforcement are modelled almost exactly on the Weights and Measures Act 1963. That Act was not introduced by a Socialist Government intent upon bringing about a police state. It was introduced under the aegis of either Lord Home or Mr. Harold Macmilllan. I do not think that anyone would accuse them of introducing the instruments of a police state. Certainly I do not accuse them of doing that. Those powers have worked satisfactorily since 1963. No doubt, because they worked satisfactorily in 1963, they were copied exactly by the right hon. and learned Member for Surrey, East (Sir G. Howe) in the Consumer Credit Act 1974. All that we have done in this Bill is to copy two adequate, well-tried and perfectly satisfactory Conservative precedents. With regard to qualifications and monopoly, I have made it clear time and again that I have no wish to see a monopoly established in the estate agency profession. That is why it has been clear in clause 22 that one has to look both at practical experience and academic qualifications. Indeed, the clause now goes so far as to say that the Secretary of State must prescribe practical experience and then may only prescribe an academic qualification as a substitute for it. I think that is an adequate protection for those who believe there is the possibility of a closed shop. There may be other areas of estate agency work, such as surveys and valuation, which are not covered by the Bill and which need some examination. But I do not think this applies to the buying and selling of houses. We have no intention, indeed no power, to create any sort of closed shop, monopoly or exclusive control of this matter. As to small firms, I do not anticipate any problems for small estate agencies. I have already said that I think that there will be no great problem in obtaining bonding. That ought to be a reassurance. I do not recall any representations from small estate agents who believe that they will be put out of business by this measure.
We all know that one can obtain insurance at a price for almost anything in this country. What worries many small firms is that the cost of the premium will be so great as either to put them out of business or substantially to increase their fees, which will make them non-competitive. When the Minister earlier suggested that he had had consultations with the insurance companies, which I am pleased to hear, did he find out what sort of premiums would be paid and whether they would be practical premiums which these small firms could manage?
It would be unwise for me, so long after the original discussions, to give an assurance as to the level of fees. The hon. Gentleman will be able to raise this matter in Committee, when I will be able to give him a more accurate answer. It would be irresponsible to try to give it off the top of my head. As I have said, I do not believe that there will be a problem. We can examine this matter in more detail. The Bill has been carefully constructed so that we can ease our way into the matter. I think it right if we start with the accounts regulations, because once we have a tradition of having the keeping of a clients' account, and the provision of an account- ant's certificate, or accountant's report, as we now call it, that in itself will make it easier for insurance companies and banks to be able to assess the cost of providing a bond.First, there is power to bring in one provision at a time and to feel one's way. It would be wrong if the effect of the Bill was to put out of business anyone who had carried on his business reputably and honestly in the past. Secondly, there is the power to make exemptions in relation to bonding and indemnities. I do not anticipate that power being used frequently. I think there will be a quite exceptional use of the power. Thirdly, if an estate agent does not take deposits there will be no necessity to obtain a bond at all. I think that also deals adequately with the question of conscience.
If the estate agent does not take any clients' money, I take it that he does not have to have a clients' account. Therefore, it seems to me that if he does not accept deposits the Bill scarcely touches him at all. Am I right?
I would not say that the Bill scarcely touches him. Of course, if he does not have any clients' money, his clients' account will have a nil balance and he would not need to become a member of an indemnity scheme or take out a bond. But there are other aspects of the matter. He will still have to declare his interest in transactions to his clients. That is an important protection. He will still have to quote his fees, and whether he charged extra for advertisements. There are those obligations as well. There is, of course, the power in the Bill to prescribe other practices which would become unlawful and would trigger off the banning process initiated by the Director General of Fair Trading. It is important to have such powers because we do not know what sort of abuses may arise in the future. The hon. Member for Stechford has given one or two examples. All I am saying is that we cannot totally anticipate the future.I should like to conclude by dealing with the matter of double jeopardy. Double jeopardy is unavoidable where a profession has rules of conduct. Double jeopardy applies to a policeman. A policeman who commits an offence is subject to double jeopardy, because he may be dismissed as a police constable because of an offence committed elsewhere. Indeed, it would be quite pointless to have a Rehabilitation of Offenders Act if double jeopardy was not a reality of life. It is a reality of life, and that is why we passed an Act on the subject some time ago. The problem of double jeopardy cannot be brushed to one side. But the reassurance is that nothing automatically follows from, say, a finding of sex or racial discrimination or a conviction for violence—for beating one's wife, as an hon. Member said. It does not automatically follow that the Director General, because of that event alone, can then proceed to debar an estate agent from his living. That is not possible and is certainly not intended. What it operates as is a trigger event which enables the Director General to inquire not only into that event but into the totality of the agent's activities, and then to make a rounded judgment as to whether he ought to take action against him by way of a warning or by way of seeking to debar him from practice altogether. Before the Director General is even able to make that decision, he must listen to representations from the agent, and the whole process is subject to appeal. The system is less onerous than that imposed on providers of credit by the Consumer Credit Act. But the problem of double jeopardy is unavoidable. I think that one has the balance right in according adequate protection to the agent when an event is triggered off. I thank hon. Members for their support for the Bill. It is supported not only in the House but widely in the country. I realise that the main criticism levelled against it is that it does not go far enough. But I suppose one earns some credit as a Minister in a Government who have been accused of legislating too much by being accused on this occasion of legislating too little. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).
Estate Agents Money
Queen's Recommendation having been signified—
That, for the purposes of any Act of the present Session to make provision with respect to the carrying on of, and to persons who carry on, certain activities in connection with the disposal and acquisition of property used or intended for use, in whole or in part, for residential purposes, it is expedient to authorize —
Option Mortgage Subsidy
I beg to move,
This draft order modifies the scale of option mortgage subsidy at present set out in statutory instrument No. 1336 of 1977. As the House is aware, the option mortgage scheme is specially designed to help into owner-occupation prospective home buyers with lower incomes. This is achieved by giving assistance by means of a direct subsidy to reduce the rate of interest paid, instead of the help available more indirectly through tax relief to an ordinary mortgagor. We estimate that at present in Great Britain about 750,000 householders are buying their own houses with the help of an option mortgage. This year, from January to June, 60,000 option mortgages have been taken out, representing 14 per cent. of total mortgages. The present draft order, like the previous ones in 1974, 1975 and 1977, is made necessary because of a change in income tax rates in this year's Finance Act. The standard rate of tax was reduced from 34 per cent. to 33 per cent., and a reduced rate band of 25 per cent. on the first £750 of taxable income was introduced. The Government have considered whether option mortgage subsidy should be reduced to 33 per cent. or, indeed, to some lower rate. We have to bear in mind that a large number of people with option mortgages would be eligible for tax relief at 33 per cent. but have no opportunity under existing legislation to transfer to a tax relief mortgage. On grounds of equity, we have therefore decided to vary the subsidy so that the option mortgagor is treated in the same way as the mortgagor who gets full tax relief on his interest payments at the new basic rate of 33 per cent. The order will reduce the existing rates of subsidy from 1st January 1979, so that the new rates correspond with the 33 per cent. tax relief. The subsidy payable, for example, on an annuity mortgage at the Building Societies Association's current rate of interest of 11·75 per cent. will be reduced from 3·9 per cent. to 3·8 per cent. Option mortgagors will, accordingly, have to pay slightly more each month. On a mortgage of £8,000, which is the average option mortgage, an extra 56p a month will be payable. If the mortgagor so chooses and the lender agrees, he may continue with the same repayments over a longer period. These increases are similar to the increases in net mortgage payments which ordinary mortgagors with full tax relief have experienced as a result of this year's tax changes. I am sure that it is the wish of the House that option mortgagors should continue to receive the same assistance as those with tax relief. It is with this aim in view that we have introduced the order. I hope that the House will approve it.That the draft Assistance for House Purchase and Improvement (Variation of Subsidy) Order 1978, which was laid before this House on 2nd November, be approved.
The option mortgage scheme is one which the whole House supports. The Conservative Party claims the parentage and conception of the scheme, if not the actual birth. We shall not oppose the order this evening.I wish to put a couple of points to the Minister. He has rightly drawn the attention of the House to the number of people taking up the option mortgage. It is not just a tiny percentage of the market. We are dealing with almost 15 per cent. of the market, and therefore we should look at it very closely. I am pleased that the rumours that were going around when it was obvious that some changes were being contemplated were unfounded and that the temptation to adjust to the 25 per cent. rate of the lower tax band has been resisted. The Government have come up with this new flexible arrangement, which is more realistic. One matter which is not covered by the proposals is the lack of flexibility under the mortgage option scheme. Having opted in, people cannot opt out in less than four years. The Minister will be aware of the feeling in the market that the Government should look at this restrictive provision and put a little more flexibility into the scheme. Perhaps there should be an option after 12 months or two years to enable people to change their minds if their circumstances change and they want to opt into a tax relief scheme. I believe that merely saying that these people should have equality with those getting tax relief is being a little negative. They are on the first rung of home ownership and therefore at the very least they should have equality. In fact, I. think that they should be treated more generously. We take the view that as they are on the first rung they should never be put in a situation in which they are more adversely affected than someone who is on tax relief. With those observations, I wish this instrument a swift passage.
With the leave of the House, Mr. Deputy Speaker, I should point out that we have very much in mind the need for flexibility. In the comprehensive housing Bill which will be brought forward this Session we shall have certain proposals to make.
Question put and agreed to.
That the draft Assistance for House Purchase and Improvement (Variation of Subsidy) Order 1978, which was laid before this House on 2nd November, be approved.
European Community (Advertising)
I beg to move,
That this House takes note of Commission Document No. R/511/78 on Misleading and Unfair Advertising.
I have to announce that Mr. Speaker has selected the amendment standing in the names of Opposition Members.
As will be clear from my speech, I have no difficulty in accepting the Opposition amendment. It is the form of the present draft directive which concerns me, not its objective of seeking protection for the consumer against misleading advertising. I am less sure about certain so-called unfair advertising but I shall come to that later.The principal theme underlying the directive—that the advertising process can give full value to the public only if it is honest and truthful—is unexceptionable. In April 1975, the Council of Ministers adopted a Community programme which contains a very sensible basic principle for consumer protection and information, and set up various priorities for the general well-being of the consumer. Advertising was accepted as one of these priority areas and the Commission was called upon by Ministers to submit appropriate proposals to protect the consumer against false and misleading advertising. In putting forward these proposals the Commission is not acting completely on its own initiative. However, the draft directive in its present form seems to have two main flaws. There are matters of detail which will be discussed in working parties and by Ministers, but at this stage—before it goes to discussion and before there is any report from the European Parliament—it is right to concentrate on the main flaws. Firstly, the directive is too limited in its consumer protection objectives and too ambitious about the way in which they should be enforced. It wants all advertising to be honest and truthful. We all agree with that. In the United Kingdom, this includes not only the Government, but consumers, the media and the advertising industry itself. All these interests agree that it is important to consumers that advertisements should be decent and tasteful, as well as truthful and honest. The advertising industry pays particular attention to trying to ensure that its advertisements satisfy all four criteria. Since 1962, when the Advertising Standards Authority was first created, and probably long before then, this has been done by various self-denying ordinances. The Commission has ignored—and rightly so—the important questions of taste and decency. Matters of taste and decency are matters for individual nations. That which is acceptable in Amsterdam may be quite unacceptable in Angmering-on-Sea. These are matters which differ from country to country. It is quite right that there should be national domestic judgments on taste and decency. One cannot ignore the fact that if we have control by a voluntary system on matters of taste and decency that control can come about only as part of the voluntary system—the ASA code. Once one tries to intervene in those areas, one puts the code and the system in jeopardy. Therefore, I make no complaint that the Commission has not tried to deal with these matters. It has concentrated on truthfulness and honesty, so much so that adoption of the directive in its present form would mean that persons affected by advertising would be given a clearly defined right to seek court action. This is where we start to differ from the Commission. People would be given the right to seek court action against an advertiser if his advertisement was misleading or unfair. If the courts found against the advertiser, they would be empowered to require publication of a corrective statement, as well as to impose other sanctions. The directive not only requires the adoption of laws against misleading and unfair advertising to enable court action to be taken; it also outlines in some detail the procedures whereby the laws are to be put into effect. I turn to the Thirty-third Report of the Select Committee on European Legislation which recommended this draft directive for debate and rightly asked the House to pay attention to three aspects of the procedure: first, the requirement that associations as well as individuals should be allowed to institute proceedings; secondly, the provision for the granting of injunctions should be without proof of fault; thirdly, the responsibility being laid upon the court to settle the terms of the corrective statement for publication. These are all important. I question whether a rigid legal procedure enforced by the courts is the most effective method of controlling advertising. It is certainly not the most effective way of dealing with the delicate issues of taste and morals, to which I referred, and which are embraced in the voluntary code. I agree with the critics of the present form of the directive who say that the process of law by itself is too blunt an instrument for dealing effectively with false and misleading advertising. The CBI and the Advertising Association, in particular, say that advertising control should be based on an efficient mixture of statutory and voluntary control. I agree with that. I think that those who framed the draft directive may have failed to appreciate the strengths of the system of advertising control that we already have. The House will know that the present system is that advertising has long been regulated predominantly by a process of self-regulation, either by the Advertising Standards Authority through its code of practice or through codes approved by the statutory Independent Broadcasting Authority. This predominantly self-regulatory process is backed up by about 60 statutes each covering aspects of advertising, though the statute law is not foremost. The law is used to provide the necessary back-up if the administrative control should fail to be completely effective. I am not saying that self-regulation alone is the most effective way of controlling advertising but the strength of self-regulation lies not in its comparative independence from the courts but in the codes of practice which underlie it. Codes of practice, especially in this area, are better than statute law as the primary regulators of misleading or unfair advertising for a number of reasons. Perhaps first and foremost they can be applied in spirit as well as in letter. I suspect that the moment that one tried to translate a code of practice formulated by the industry into the letter of a primary statute or statutory instrument—the moment the industry was asked to concentrate on, or rather had no choice but to be bound only by, the letter of the law—I am sure that there would be a heyday for copy writers. They would look at the wording of the statutory control and nudge one another and say "We can soon find a way around that." Self-regulation, a code which is agreed by the industry, an obligation to follow the spirit as well as the letter of the matter, seems to me much more satisfactory. Apart from the advantage at the moment that one is bound by the spirit as well as by the letter, objective interpretation of the law requires it to be obeyed according to the letter and therefore gives considerable scope for avoidance. But codes can embrace subjective questions of taste and morals—even questions of social responsibility in advertising—which are not easily definable in statutes but which are as important for consumer protection as being misleading or unfair. More importantly, codes of practice can be more frequently updated than the law to take account of continuous change in marketing practices and social acceptability of advertisements. For all these reasons, I think that the better control of advertising than the strict legal remedy pursued through the courts would be to continue to develop codes of practice and where necessary to strengthen this form of administrative control within an appropriate statutorily-based regulatory framework. I agree with the Commission that self-regulation, of itself, is an insufficient control and needs to be supported by statutory control, but I do not think that statutory control ought to oust the very valuable system we have developed over a number of years. I argue that any development of the appropriate form of statutory control to meet the Commission's objects would best be left to member States to develop in accordance with their existing legal traditions and institutional arrangements. I do not think that this is an unreasonable principle to press for in this context. If it is successfully pressed, the three specific points mentioned in the Thirty-third Report to which I have referred would of course be subsumed. Such an approach would deal with the other issues raised both in the Thirty-third Report and in the report on the directive from the other place, which dealt with the merits of the matter as well as recommending it for debate, namely, that certain aspects of the court procedures proposed in the draft directive would represent significant innovations in United Kingdom law and practice. I have already mentioned one, the class action, which is at present virtually unknown in this branch of English law, and also the provision for making court orders without proof of fault. In its present form, the directive would also require the burden of proof in relation to the correctness of a factual claim to be placed on the advertiser, instead of an objector, and might require the creation of a new criminal offence. Whatever their wider merits, these elements in the present directive have important implications for United Kingdom law and practice which should not be imported upon the back of a directive which is narrowly concerned with advertising. It therefore seems right to remove from the directive all these features, and in particular to alter the present text of the directive to permit advertising to be regulated by appropriate authorities, such as the ASA or the Director-General of Fair Trading, in addition to the courts. I want the useful work of these authorities in advertising to continue. I share the view of the Select Committee and the Scrutiny Committee in another place that two systems of regulation—one the voluntary system and the other recourse to the courts—could not in practice co-exist and that in their present form the Commission's proposals would seriously undermine the administrative control systems and would certainly not work as well. The other main claim which the Commission has made for this directive is that misleading advertising and unfair advertising are improper ways of influencing the market process and that consumers and competitors and the public in general must be protected from them. The Commission has claimed that the differing degree of legal protection against misleading and unfair advertising in member States hinders its objective of promoting harmonious development of economic activities throughout the EEC. I do not know that there is need, in the context of an advertising directive, to harmonise laws in order to secure the free flow of goods and services across frontiers. I understand that about 90 per cent. of advertising is directed to particular countries or even to particular regions within countries. It is very unusual for advertising campaigns to be developed with the prime object of transcending frontiers, because ethnic differences, differences in taste and indeed language and differences in the way in which advertising messages might be received would differ among the various countries and within the various regions of Europe. There might be a little cross-frontier advertising, such as takes place in Ireland, but I think that I am correct in saying that this is very limited and to an extent which is peripheral to the main objects of the directive. For this reason, I can understand the wish of both Scrutiny Committees to challenge the legal basis of the directive. It is hard to understand why legal differences in member States about advertising should directly affect the working of the Common Market. I also think that the concept of "unfair" advertising, which is introduced in the directive, may have more to do with protecting advertisers from one another than with protecting consumers from the advertisers. These features in particular have attracted much criticism of the directive in its present form. There are thus several grounds on which the directive, in its present form, can be criticised. However—perhaps I should come back to the point that I made at the beginning—the Commission initially acted upon a proposal of Ministers and did not do this entirely on its own initiative. But I believe that, in the discussions which have taken place, and there are many more to take place, the Commission recognised many of the difficulties. I was very encouraged to read in the European Parliament's "Rainbow Hansard" for 1st October that the Commission's President, Roy Jenkins, had reiterated that the Commission does not believe in harmonisation for harmonisation's sake; that harmonisation proposals must be justified by promoting trade within the Community and strengthening foundations for economic and monetary union—not everybody would agree with that; and that the Commission proposes to concentrate on areas of real need. He added something which is very important in the context of the advertising directive—that the Commission
but should"should not seek to include unnecessary detail"
He also said:"rather … lay down the primary objectives to be obtained and leave the detailed implementation to member States."
The House will understand from what I have said that the proper application of these welcome principles will meet all my objections to the present draft directive. I shall continue to press for their application in all future considerations of this directive, in the confident belief that the Commission will take careful note of the wise words of its President in future negotiations and take, I hope, even more note of the wise words which will be uttered in this debate."The Commission would be very willing to consider taking action to amend or withdraw proposals, taking into account these guidelines."
I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:
This is the second time this week that we have discussed the harmonisation of consumer protection policies in the Community. The Minister of State's words will give great encouragement to those of us who believe that with consumer protection, possibly above all else, there is clearly room for agreement upon aims and general objectives while we reserve to ourselves detailed control of the way in which those objectives are met. With misleading advertising there can be no doubt that the system to which the Minister has referred has been designed to protect the United Kingdom consumer at little cost and with some great effectiveness. We should not lightly see it overthrown in the name of a general objective to harmonise protection against misleading or unfair advertising. That in no way prevents us from speaking in the debate as profound proponents of the Common Market and what it seeks to do. But in advertising there is little evidence that this is a facet of trading or marketing which is a serious embarrassment to the individual frontiers which occasionally it might cross. As the Minister of State reminded us, Ulster Television beams into the territory usually served by Telefis Eireann. I am not entirely persuaded that that has been an embarrassment to either Government. No doubt with the French or Walloon-speaking peoples of Belgium the internal divisions are far greater than could be provided by any national frontier in terms of advertising control. So we must draw one conclusion from the debate. It is that for the second time within five days the House of Commons is arguing that in consumer protection policy it is vital to try to agree general aims and objectives which none of us would probably dispute but to allow the means by which those objectives are achieved to be primarily matters for individual national Parliaments, bearing in mind the separate national systems which exist. I make one caveat on that, because I appreciate that it is a bold statement. It is that there exists upon all members of the Community who are interested in increasing the standards of consumer protection the duty to see that there is a threshold of acceptability for consumer protection throughout the Community. There may be markets where the use of misleading or unfair advertising practices is so blatant and widespread a disservice to the community that international measures must be taken. I think the Minister of State recognises, as we on the Opposition side recognise, that in this country that is not the case and that systems have been developed over time which have stood the consumer in good stead. It is right for me to remind the House of my interest in these matters and to declare that I am a consultant to an advertising agency and have had substantial experience in a manufacturing company which is a substantial advertiser. I do not regard that necessarily as being a disqualification but perhaps rather as some additional qualification for what I am about to say. In welcoming our amendment, the Minister of State has once again demonstrated that there can be a substantial degree of unanimity on this matter. We are concerned not with the general objective of the Community in seeking to arrive at a level of protection which is consistent throughout the marketing area but with the way in which it is proposed to do that. We agree that the consumer should be protected from misleading and unfair advertising. But we do not agree, and the Government have clearly stated that they, too, do not agree, with the means proposed in the directive. It clearly involves the introduction under article 5 of a complex legal structure even where member States have, as is permitted under article 7, a self-regulatory system. Why do we so strongly prefer a self-regulatory system? That is the type to which the Minister has given his blessing and to which we on the Opposition side subscribe. It is not that we are opposed to the use of any law or any legal sanction governing the activities of advertisers or their agents, or the effects of advertising upon our community—far from it. There is in this country a substantial body of statutes which govern and protect the consumer at the point of sale. Advertising is covered by many of those statutes whether in the Trade Descriptions Act, the Fair Trading Act, the Consumer Credit Act, or the Sale of Goods Act and many others. Advertising is seen to be a part of the selling process which should not impinge unfairly or in an agressive or misleading manner upon the consumer. Moreover, we have a statutory system to control advertising on the most powerful medium, namely, television. If to that we add independent local radio, we can say without peradventure that the Independent Broadcasting Authority is obliged by statute to control, and is answerable to this House for the way in which it does it, advertising on both those important media. That system has been in operation recently. The Select Committee on Nationalised Industries has only just completed a survey of the Independent Broadcasting Authority, in which it took great pains to examine how the authority meets its legal obligations to control and vet advertising on television and radio. I com- mend the Committee's Tenth Report to hon. Members. It will provide ample evidence and ample opportunity for discussion about the way in which statutory control of advertising is undertaken by the IBA. The Committee's findings suggested that the system works well. It involves the pre-vetting of advertisements in the early stage of typescript or at the filming stage before the advertisements are transmitted over the television network. It is interesting, too, that the IBA's code of practice, which is the fundamental instrument governing the control of advertising, is largely based upon a code of practice which the Advertising Standards Authority, the voluntary agency, has issued in relation to other media. The IBA is strengthened in its statutory provision by being able to deal with sensitive matters such as the advertising of alcoholic drinks, of medical products or of products that children buy, by calling in additional medical experts and differing processes for handling advertisements for those markets. In recent years the Advertising Standards Authority has provided the main body of the code of advertising practice. The IBA has largely based its activities upon what the authority recommends for the media for which it it responsible. While television is a significant absorber of advertising revenue, it is not the largest advertising medium in terms of the number of advertisements published. That still remains the printed medium. Hon. Members must remember that in printed advertising the largest sector in terms of the number of advertisements is still the classified advertising sector where so many of our constituents, and possibly hon. Members, advertise articles for sale and also, possibly, recognise that they may be infringing the code of advertising practice. It is in classified advertising that consumer complaints frequently arise. This is where the individual citizen has the right to decide how he shall word his advertisements, subject to what the newspaper proprietor—if he happens to be in membership and observes the code of advertising practice—agrees to accept.'in taking note of Commission Document No. R/511/78 on Misleading and Unfair Advertising, considers that in its present form it is not acceptable to the United Kingdom, as it seriously undermines the existing system of self-regulation.'.
Will the hon. Gentleman accept that the code of practice tends always to deal with quality and even good taste, but never with the immorality of advertising? I have in mind advertisements selling products which make deprived children feel that unless they have a certain product which their parents cannot afford they are somehow left out in the cold.
I concede to the hon. Gentleman that such a matter cannot easily be decided by the acceptance of an advertisement. What the Advertising Standards Authority, or its member and associated operators, cannot do is to determine how the advertisement will be received in a variation of homes. If an advertisement is accepted for television use, it is accepted for all television use. It cannot be restricted to those homes which are, for example, above the average income level. It is a nonsense to suggest that the Advertising Standards Authority should seek to deal with those advertisements which are likely to have a disproportionately harrowing effect upon those homes which have 15 children and not the means to support them.What the authority and what the media have to do is to ensure—within the terms of the code—that the advertising is decent, honest and truthful, and that the spirit of the code is observed, too. The hon. Member will, I am sure equally recognise that where the advertisement appears and when it appears, and in the context of what programming it appears, are matters not for the authority but for the media owner and the way in which he handles the advertising.
I am sure my hon. Friend would agree with the findings of a report from the Office of Fair Trading published this morning. I shall quote two sentences from it which touch on the point raised by the hon. Member for Isle of Ely (Mr. Freud). The report says:
this was the result of some of the research which had been mounted—"The notable result"
That is, perhaps, pertinent."was that reactions to advertisements were remarkably consistent as between different types of respondent and between different types of advertisement. Responses did not show that any particular group—eg the poor, the young, the old or the less well-educated—were any more vulnerable to advertising than others."
I am grateful to my hon. Friend for raising that point. The report issued today, to which I shall shortly refer, gives many answers to some of the questions raised by hon. Members when discussing advertising matters.I return to the code because it is the basis of the self-regulatory system which we have in this country and it is the code which we regard as being so important. In the 14th report of the Advertising Standards Authority, the chairman of that authority, Lord Thomson of Monifieth, said in discussing this European directive:
I suggest that it is very much that degree of conviction which is, in a sense, on trial here tonight. The Minister has thrown his weight—I welcome this—in favour of the self-regulatory system and the voluntary code system, embodied in the Advertising Standards Authority. We as representatives of our constituents, and those of us who understand the anxieties of those affected by misleading advertising or unfair sales practices, must take a view whether the system of voluntary codes and practices should be endorsed. If the House does nothing else tonight, it must take its stand and decide whether it is in favour of this voluntary system being proceeded with. Both the Government and Opposition take the view that this is the right system. That system is crucial to the way in which we examine this directive and the House must say whether it believes that this is the correct system to pursue. In the draft report that was put before the European Parliament by the Consumer Protection Committee, the rapporteur, Lord Kennet, spoke in favour of the system. He said:"What is at issue is the balance to be struck in the general public interest between self-regulation and state regulation. There are bureaucrats in Brussels as well as ideologists at home who would like to tilt the balance decisively in the direction of statutory enforcement … For self-regulation to sustain its case it must not only be capable of striking a fair balance between the advertiser and the public. It must also be seen to do so."
Broadly, I believe that the consumer associations would agree that the self-regulatory system, subject to certain shortcomings, is a better system than one based purely on complex statute law. The Select Committee in another place was even sharper in its conclusions. In its 38th Report it drew the following conclusion:"The British self-regulatory system, although it has certain shortcomings, has so far produced satisfactory results. This is in fact recognised by the British consumer associations."
That is the fundamental issue before us. It relates to whether the proposals in the European directive, which require a system of law being set up under article 5, alongside a self-regulatory system allowed under article 7, are a sensible way in which to proceed. It is the overwhelming view of the bodies which have examined this matter that this would not be in the best interests of consumers in the United Kingdom. It is only fair to add that the National Consumer Council is critical of a voluntary control system. It has issued a pamphlet entitled "Advertising—legislate or persuade?". Having considered the voluntary system of codes which operates here, the council concludes:"The Committee, though they recognise that there are loopholes in the United Kingdom's self-regulatory system, are of the opinion that, in general, it is efficient and economical and that it would be unwise to set up alongside it the legal system called for by the Directive which might supplant the self-regulatory system, and not work so well."
That conclusion is endorsed by findings undertaken by the European Union of Consumer Groups. That body examined a substantial number of advertisements in the British press—a total of more than 3,000 advertisements—and concluded that about 14 per cent. of those advertisements did not fully comply with the British code of advertising practice. It felt that a total of 7 per cent. were seriously at variance with the code. We must accept that the evidence produced by that body constitutes a critical comment on the way in which the code operates. However, that is not the only piece of research that has been conducted. Today we have seen the publication of the report of the Office of Fair Trading into the workings of the Advertising Standards Authority code of practice. The House will want to have an opportunity to examine that important report at its leisure. It endorses the acceptability of the code and the way in which the consumer is protected by it. Let me quote from one of its findings. As part of its review, the Office of Fair Trading"On the basis of factual surveys we have concluded that the main control system—thevoluntary Advertising Standards Authority administered British Code of Advertising Practice —has not provided adequate control against misleading or unfair advertising."
That is an astonishing statistic, bearing in mind the vast numbers of different advertisements to different sectors of the market which are printed each day and each week throughout the length and breadth of the United Kingdom. The study conducted by the Office of Fair Trading does more than merely provide the facts on which it bases its conclusions. Now, through its Director General, Mr. Gordon Borrie, it firmly believes that the self-regulatory system is valuable and should be built upon. In his summing up to the report, the Director General of Fair Trading has said:"commissioned research to gauge the extent to which advertisements conform to the code. The results indicate that the vast majority (93 per cent.) of advertisements in newspapers and magazines conform to the code."
That is the view of the Director General of Fair Trading. I think that it endorses the view of this amendment, which I am so glad the Government have accepted, which is that the self-regulatory system, if it is tightened up where it is shown to be weak, and if it is given, perhaps, a statutory background in which it can work, will provide a complete answer to those who believe that we should improve our standards of consumer protection against unfair or misleading advertising. Where should the statutory element come in? We are clearly aware that the voluntary code—this applies to all voluntary systems—depends for its success upon its acceptance by all those who are involved in the trade or service industries. In the case of the Advertising Standards Authority, its writ will run only to those who willingly subscribe to both the spirit and letter of its code. It is obvious that there are some instances where the writ does not reach. It does not reach, for example, the handbill that is issued in the street. It does not reach the fly-by-night trader. It does not, perhaps, effectively reach the direct mailer who can put through the letter box advertisements which do not pass through the normal vetting which a media authority can apply to it, and it may not reach the unscrupulous who refuses to abide by something which does not have statutory backing. Therefore, I think it is probably right that the Director General should conclude, as I suspect the advertising industry itself should conclude, that if the self-regulatory body is to be given another lease of life it must recognise that there are certain areas where it requires strengthening. I suspect that it will readily agree that it is infinitely preferable for some additional power to be given to, let us say, the Office of Fair Trading, to provide a legal back-up to the voluntary system, than to endorse the legal system proposed under this EEC directive. This again is one of the burdens of the Opposition amendment. We see, very strongly, the self-regulatory body as being the main base upon which advertising control should rest. But we recognise that there may be circumstances in which it is shown to be weak. This, clearly, is the view of the National Consumer Council. It is now the view of the Director General of Fair Trading. I have reason to believe that the advertising interests themselves recognise that some additional power might help their code of practice and their self-regulatory system to improve and to be more effective to the consumer. What should that be? That is a matter for discussion. As I understand it, the Department of Prices and Consumer Protection, from which we have here tonight the Minister of State, is prepared to enter into discussions about the kind of progress that might be made to see whether some addition to the power of the Director General of Fair Trading would be acceptable. Let me make it clear that the Opposition have always held the view that the Office of Fair Trading is the right authority to conduct investigations or to use statute law in the area of consumer protection. We much prefer that that should be the authority to use statute law rather than, for example, consider making the Advertising Standards Authority a statutory body, or to include statute law of a quite different and unique kind, as is proposed by this directive. We think that there is room for discussion. We think that there is room, perhaps, for back-up legal powers under the restraint and desist orders which the Office of Fair Trading can issue under, I believe, both part II and part III of the Act, which will provide that abuses of the code should be regarded as an offence and for which restraint orders can be issued in matters of trading. The House must recognise that what is proposed in the directive is not acceptable. That is not because we do not understand what the EEC is after—that we understand—but because in the United Kingdom we have a system that has been shown to work well. It has been shown by a report as recently as today to work extremely well in covering virtually 93 per cent. of the advertisements available in the printed medium. We have statutory control of the advertising content of both radio and television. The House should be in no doubt that what we seek by the amendment is an understanding that the self-regulatory system, possibly with some improvement and possibly with some further backup powers carried out by the Office of Fair Trading, must remain the central method of dealing with the problem of misleading and unfair advertising. I quote from the Law Society, which examined the proposals of the EEC directive purely from the legal point of view. It stated:"I hope this survey will help to put matters into perspective. Our research has produced no evidence to suggest that the public are being misled or confused by advertising on a wide scale. Indeed, it suggests strongly that, with a general tightening up and the limited statutory backing proposed, the self-regulatory system should provide adequate protection for consumers."
It has caught the mood of the directive nicely. It may be necessary in certain markets of the Community to introduce a legislative framework for advertising control to prevent consumers from being exploited by misleading or unfair advertising practices. It cannot be said that that is the position in the United Kingdom market. We have a proven system that is financed by the industry. It is adopted by the majority of those who are involved in the expression of advertisements through the media. We recognise that there may not be 100 per cent. coverage but the principle and spirit that it embodies allow the consumer a far greater degree of protection than anything proposed under articles 5 or 7 of the directive. Article 5 asks that we produce such laws as will"It may be that in practice the immediate objective is to require those member States whose laws are substantially more lax than those in the rest of the Community to bring them up to a certain minimum Community standard on the basis that this existing laxity is more of a threat to the functioning of the market than any hypothetical future excess of regulatory zeal by individual member States."
The Minister of State is a solicitor. I doubt whether he can say that any legal process in his knowledge has been quick —it may have been effective or inexpensive—in dealing with those matters. We know that the body of law suggested in these proposals cannot be quick. It cannot be cheap and it is likely that it will not be effective. Therefore, the amendment has been moved in the spirit that the self-regulatory system, improved and, if necessary, after discussion with the interested parties, backed by the Office of Fair Trading, is the best possible security that the British consumer can have that he will not be deterred by misleading or unfair advertising."provide persons affected by misleading or unfair advertising, as well as associations with legitimate interest … with quick effective and inexpensive facilities for initiating appropriate legal proceedings against misleading and unfair advertising."
As is clear from the Order Paper, my hon. Friends and I tabled an amendment. We understand why it has not been selected. It states
We support the Opposition amendment. I am glad that the Government have accepted it although I must stress immediately that I do not think that my hon. Friends would join in the laudatory plaudits of the advertising industry that we have heard from the hon. Member for Pudsey (Mr. Shaw). It has been quite a week for the EEC both in the House and outside. Events started with the Prime Minister having a go at the common agricultural policy. This is the second time that the official Opposition have tabled amendments to EEC "take note" motions. I am pleased to see that intelligent and progressive step being taken. We have also had this week Lord Thomson of Monifieth, admittedly wearing his other hat, being called in aid to help an amendment against the Community. It has been quite a week. I congratulate the Minister on his comprehensive critique of this complex document and for the annex to his memorandum which shows the large number of bodies consulted on this matter by the Government. The whole House will recognise that this sort of stupid harmonisation shows the municipal role of the House in no uncertain way. This is a sensitive national affair about which there are wide views. As the memorandum says, there are 60 existing statutes which have a bearing on this sensitive matter. The whole position is summed up by the evidence of the Mail Order Publishers' Authority, which said in its memorandum to a Sub-Committee of another place:"but cannot accept proposals which might involve the creation of new criminal offences and would undermine the authority of existing self-regulator bodies administering voluntary codes of pracice."
Most of us agree that we want to do it our way. The hon. Member for Pudsey was too kind to the industry, though he declared his past interest in it. Many of us do not recognise the happy picture which he painted. It seems to many of us that display advertising, as opposed to classified advertising which has an important part to play in providing information, all too often stokes up the less happy feelings of mankind and appeals to envy. acquisitive instincts and snobbishness—"The draft directive on misleading advertising, if implemented, would play havoc with established British law, seriously undermine the self-regulatory system, give the aggrieved consumer no benefit that he does not already enjoy, and create intolerable uncertainties for business (and consumer) as to the scope and application of the law."
I am reminded of Dr. Johnson, who said:"Wear this, buy that, and you will be like the people in the advertisements."
Often the promise is made of commodities that are not susceptible to scientific test. People experience only disappointment. Such advertising builds up expectations which are all too rarely fulfilled. If we could use this debate as a moral, we are seeing this week the expectations built up by the advertising techniques for the whole EEC outfit beginning to reach the stage of disappointment. Perhaps it is therefore appropriate that we are discussing advertising. The whole EEC adventure was built up with a package of expectations which was not justified by the contents. Only some hon. Members had the political sagacity to see what was inside the package and to read the small print which was not read by other hon. Members and was obscured from the general population."Depend upon it, Sir, promise is the soul of an advertisement."
What evidence has the hon. Gentleman that if we had not been given that package things would not be a lot worse than they are?
I am referring not to any social or economic position in the country as a whole but to the way in which we are entangled in legislation made from another place across the sea. But for the amendment and the Government view of it, we would find ourselves enmeshed in the tangle of legislation which the hon. Member for Pudsey described so graphically.The possible reason for this essay in harmonisation stems perhaps from a completely different attitude to law. I am no lawyer. I have no doubt that others will confirm that the attitude and assumptions of law and law-making in the countries across the English Channel have a different basis, history and expectation from ours. We all agree that on this side of the channel the combination of voluntary practice, possibly with some statutory framework rather than statutory detail, is best calculated to strike the balance between the interests of the consumer and those of the legitimate advertiser and business man. I am not qualified to say how that should occur. I am glad that the hon. Member for Pudsey believes that there should be a development in that area. I believe that there should be such developments for the reasons that I have outlined. I recall the worst type of advertisement which traded upon people's fear. It involved a well-known beverage which was taken at night and which was heavily advertised. There was a strip cartoon associated with these advertisements. It was a wicked and evil cartoon which showed an elderly lady—a grandma—who lived with her family. The cartoon showed the harassed daughter-in-law saying "You know, grandma, I shall have to think about asking you to go." This implied that the daughter-in-law was going to find an old people's home for grandma. The cartoon then showed grandma drinking the marvellous beverage. Then the daughter-in-law said "Grandma, I do not know what we would do without you." I hope that we can get rid of that type of appeal to fear by either voluntary methods or some type of gentle but effective statutory backing.
Is not the appeal to fear outlawed by this draft directive? Is not that one of thefew good things about it?
I was about to deal with that matter. I was about to quote from the Government's memorandum in which, under the heading "Policy Implications" paragraph 5(ii) states:
If one uses the analogy of the night beverage advertisement, hon. Members might say "Hear, hear" to that. But perhaps they have not seen the next line of the memorandum which states:"the definition of unfair advertising includes any advertisement which appeals to sentiments of fear".
I believe that in certain instances there might be a right appeal to fear in advertising. The seat belt campaign, which we arc to discuss later in the Session, is a correct use of that appeal. Hon. Members of a particular age will remember the argument that arose out of the advertising of what was known as the "weedy widow". That created a great deal of controversy. Perhaps it was a justified advertisement and it was paid for by the Government. Perhaps that was a proper use of fear. Rather than having these detailed, Continental-type definitions, we in Britain should move towards something which the right hon. Member for Down, South (Mr. Powell) might be able to help us with—the use of Greek words. I suspect that the Greeks would have different words for those different emotions. He may be able to tell us. There is bad pride and good pride, as he pointed out in the debate the other day, and I suspect that there is also good fear and bad fear. I am not against the right use of fear in the right sort of advertisement for proper ends, but I am sure that we would deplore its use in other ways."This could reduce the impact of Government advertising which has been successful through making justifiable appeals to fear in the fields of fire protection, road safety and vandalism."
I know that the explanatory memorandum provided by the Minister suggests that advertising by the Government based on fear—for example, to prevent accidents—might be caught by the draft directive, but is my hon. Friend sure that he is right to accept what the Minister has said in the explanatory memorandum? As I understand the draft directive, it is designed to improve trading practices and relations within the EEC and therefore—I am open to correction—it will not catch Government noncommercial advertising. The Government can continue to advertise on the basis of fear, in the interests of all of us.
I think that this is for the Minister to say. I certainly would not presume to answer for him. He can deal with it, if he wishes, when he replies. But if my hon. and learned Friend is advocating the merits of this document —which I rather fear he may be, from his comments—I would repudiate any such thing. I may be doing him an injustice—
My hon. Friend is doing me an injustice.
I am glad to hear that I am, because I have suggested that the way to tackle the problem is quite different.Paragraph 4(iv) of the explanatory memorandum points out that
It is not definitive but at least there is a suggestion that it might. We were told that going into the EEC would not involve anything of that sort. Now we are told that something of this sort is envisaged. I suggest that the House should pursue the line of better and perhaps more effective voluntary arrangements in the fields that I have mentioned, particularly in those which are liable to great social dissatisfactions which can never properly be filled by material purchases. People cannot get everything with money, although advertisers suggest that they can. I have suggested the line that we should pursue together with the statutory framework that the hon. Member for Pudsey mentioned. My only quarrel with what my hon. Friend the Minister said is that he was talking about modifications. I would say to him—and I hope many other hon. Members will as well--that we do not want modifications. We want him and the EEC to drop it."the proposals might necessitate the creation of new criminal offences in the United Kingdom".
I hope, Mr. Deputy Speaker, that you will agree that I am not exaggerating if I use the adjective "amazing" for this debate. It is truly an amazing debate. Although the Government and the Opposition are apparently at one in their attitudes to the draft directive, and although a very skilfully drafted amendment has already been accepted by the Minister, it is extraordinary that the speeches have been getting longer in adding to the arguments which have already been put so well by hon. Members on each side for objecting to most of the main parameters of the directive.The debate is not only amazing from that point of view. It is also perhaps amazing and encouraging in the sense of the development of scrutiny in this House. There has long been a sinister myth—perpetrated by hon. Members such as the hon. Member for Newham, South (Mr. Spearing), and put around in this House—that those who are very enthusiastic about our membership of the EEC are implacably opposed to any effective scrutiny of EEC matters in this House.
Evidently I am being unfair to the hon. Gentleman, who is vigorously denying my suggestion. Perhaps some of his colleagues take that view and think that, relatively speaking, it is only a prerogative—
I prefer not to give way at the moment because I am anxious not to be too long, Mr. Deputy Speaker. I think that what I am about to say to the hon. Gentleman will assuage his anxiety that I am being unfair. I am sure that he will agree that there are some people, at any rate, who say that it is only on one side, on the part of those with a particular view about the Community, that a demand exists in this House for vigorous scrutiny—
I will give way to the hon. Gentleman.
I am very grateful to the hon. Gentleman for giving way. I need only to refer to the recommendations of the Procedure Committee which are now before the House. If he will look at the names of the members of that Committee, he will find that the majority of them do not share my views on the EEC.
I was about to say the same thing as a result of the hon. Gentleman looking anxious about my earlier remarks.At all events, there is a recognition in the House of a difference of attitude towards these matters. Yet it is extremely agreeable for those who feel that there is a legitimate role for EEC legislation, which is the umbrella for the national legislation of all the member States, in the context of what national Parliaments and Governments do to defend legitimate national interests in the Community's councils that effective scrutiny should take place in all Parliaments, not just in this one. In this context the United Kingdom and Denmark lead the field. I am glad that, through the sensible pragmatic approach of this House, in the face of hon. Members, such as the hon. Member for Newham, South, saying that it could not be done, we have built up the practice of having amendments. Such amendments are expressions of opinion, of course, without substantive force, as we all acknowledge, but they lead directly to a prise de position by Governments in the Brussels councils and, I hope, a solemn and firm adherence by those Governments, of whatever complexion and colour—I see the right hon. Member for Down, South (Mr. Powell) agrees—remaining in that position. It is up to any Government in that context not to be so rash as to agree to anything here which they know they cannot negotiate when they get back to the Brussels negotiating table. I know that the Minister, being a sagacious person and having presented his argument skilfully, would not dream of making such a rash promise. 1 hat has been shown by his acceptance of the amendment and the indication that the Commission is extremely flexible on the objections beginning to emanate not only from this country but from some of the other member States. It is not true that we have a monopoly on relative indignation on this draft directive. Other points are being made in other member States. They will come together in a new attitude and a revised document. That is a healthy process. In the sense that that is common view and basic to what a national Parliament can do in its relationship with the Community, even if the period of the great debate is unfortunately rather extended, that makes sense and appeals to the innate common sense of the British people. All the ridiculous additional conclusions that anti-Marketeers keep drawing from that—"We object to some of the problems in the Community; therefore, we should abolish it or, it should abolish us "—or that we should leave the EEC are absurd. We all know that there are many problems facing the Government. Their whole policy is based on fear, not just in the context of advertising but in the context of all the problems facing them or facing this House as an institution. We do not say that the Government should be abolished—perhaps I might reconsider that statement. We might in fact say that. But we certainly would not say that the House of Commons should be abolished. Those distortions of the background continually surrounding all these directives as they come before the House should be dealt with forecfully by those of good will in all parts of the House who hold the interests of the British public dear in the sense of our continuing membership of the Community. We should work constructively in all the EEC councils to make the best of what is presented. After all, I imagine that British officials were involved in drawing up the later stages of the draft directive, because it all began in 1975. Therefore, I think that there is a meeting of minds on the contents of the directive. Both the Minister and my hon. Friend the Member for Pudsey (Mr. Shaw) have ably developed our objection to the imposition of excessive legislative force and our preference for the voluntary code. I shall not repeat the many valid points which have been made. This is another very good example where the Community should limit its intervention in the internal activities of the member States. That, after all, as someone said, is 90 per cent. -plus of what we are considering tonight in all the advertisements on television, in the newspapers and elsewhere within the framework of the proposal. The Community should limit its interference at the maximum to creating some kind of framework directive which would sound and look like a code of conduct, would be broadly couched and delimited and would leave the rest to the efforts of individual member States. I think that if the Minister had time to consult opinion in France—a country which we often regard as dirigiste and where there are strong laws on advertising, which I do not accept; they go too far —he would find that some senior personnel in the Régie Francaise de Públicité, which organises all television advertising on the three channels in France, would say that the law can be taken too far in these controls. As the Minister rightly said, only a residual element of intra-Community trade could come within the context of any advertising relevant to these proposals. It is extremely remote. It may develop in the future. That is certainly possible, and then there may need to be a stronger directive, but that may be in 50 years' time. In the meantime, the scope is limited. There is no evidence that these are matters involving the distortion or limitation of free trade between the Community States I think, therefore, that the Minister has adopted a correct, justifiable and defensible attitude. We thank him for that, and we thank my hon. Friend the Mem- ber for Pudsey for having agreed with that position and for having moved his amendment.
I belong to the Scrutiny Committee, to which my hon. Friend the Member for Newham, South (Mr. Spearing) referred. He says that it contains a majority of pro-Marketeers, but I disagree. It contains a majority of anti-Marketeers, and with the presence of the hon. Member for Banbury (Mr. Marten) and the hon. and learned Member for Beaconsfield (Mr. Bell) the majority of anti-Marketeers seems to be very great. In terms of attacks on the Common Market and the amount of speech in that Committee, the anti-Marketeers have it, and no one objects to that.
It is true that the anti-Marketeers attend that Committee much more than the pro-Marketeers do, and when we attend it we play our full part in protecting British interests.
It is absolutely right that the anti-Market members, with the pro-Market members, play their full part in protecting British interests. It is not incompatible with favouring the EEC to disagree with individual proposals emanating from it. That is partly what the Committee is about.
I must apologise to my hon. and learned Friend. I could not have been speaking sufficiently distinctly, or perhaps I spoke too quickly. I was referring not to the Scrutiny Committee but to the Procedure Committee, which has issued a report in which it says that it wishes to see a change in the procedures whereby we examine documents of the kind that we have before us. I think that my hon. and learned Friend will agree that I was correct in respect of that Committee.
I would not know, but I accept what my hon. Friend says about it.I know that my hon. Friend is exceedingly enthusiastic in his opposition to the Common Market—opposition which has continued over the years. He told me in hushed tones in October 1971 that to join the Common Market would mean a change in the size and shape of milk bottles, and he asked whether that would not change my mind. I promised to consider the matter, but it did not change my mind. We must keep a sense of proportion about the entire issue. The basis of the proposed draft directive is to promote equality of protection of consumers within the EEC and enable advertisers to advertise in all the countries of the EEC without worrying too much about differences in law between those countries. There is nothing wrong with those ambitions, but they must be weighed against other considerations. I do not believe that the fact that life may be a little more difficult for international cross-border advertisers should matter so much that we introduce legislation that is of dubious advantage and may be rather complex in Britain. For that reason, I am not too happy about this draft directive. There are one or two matters about which I should like to be clearer in my mind. It has been suggested that ministerial advertising in terms of road safety based on fear would be unlawful under the directive. As I have indicated already, I am not certain that that is right, and I look forward to hearing what the Minister has to say about it. Let us consider an advertisement which is not ministerial but simply political. I have in mind, for example, the Saatchi & Saatchi advertisement, "Labour does not work". I know that most people read only the first word, "Labour", and assumed that it was a Labour political advertisement, which some hon. Members may find surprising. But there was a queue of people depicted in the advertisement who were supposed to be genuinely unemployed. Of course, they were not unemployed at all. It now appears that all of them were employed. That is a deception. It is misleading. Will it be caught by this draft directive? I think not, on the basis that politicians, being clever, have excluded political advertisements from the directive. It nowhere says so expressly, but I believe that to be the case because such advertisements are not connected directly with commerce. If that is right about that type of advertisement, surely it must also be right about safety advertisements based on fear. The first type of advertisement could be held to be illegal on the ground that it was misleading if it was caught by the directive. I hope that those two matters will be cleared up by the Minister.
What would the hon. and learned Member assume to be the position in respect of an advertisement by a commercial organisation which had invented a device which was important to safety and had marketed it on the basis of an appeal to fear? Would he say that that would be ruled out? If so, does he think it sensible that it should be?
It might be ruled out, and it would not be sensible to have a directive ruling it out. That is one of the reasons why I am unhappy about the directive.I come now to a legal point about the directive. It switches the burden of proof from a person alleging a misrepresentation of fact to the person who produces the advertisement. In other words, under the draft directive one need only allege that an advertisement is misleading as to the fact and that it misrepresents the fact for the burden, which can be extremely heavy, to fall upon the person advertising to prove in court that the fact is correct. That seems to me to make it easy to make the complaint but not always easy without great expense to produce a defence. It has been a general principle of English law that the burden of proof is on the person making the allegation. The prosecutor, for example, must prove his case. We have one or two exceptions to the general rule, but we admit those exceptions very reluctantly and sparingly. I have yet to be convinced that the case is made out in this directive for reversing a hallowed and traditional rule of the English legal system—a rule, incidentally, which has helped to make the British legal system regarded as one of the fairest in the world. Before this type of directive is accepted, I hope that there will be a careful examination of the proposition contained in it about the burden of proof. In the directive, there is no defence of public interest. It has been suggested that where an advertiser relies on fear to show that something can happen unless use is made of, for example, a new device perfected by a commercial company, there is an offence. But there should be a defence based upon the public interest. I do not find a defence of public interest in the draft directive, and to that extent I regard it as potentially a directive for injustice. The definition of unfair advertising, which is an offence under the directive, is very wide and to some extent vague. For example, any advertisement which exploits the
is an offence. When one talks about exploiting "the credulity" of the consumer one thinks, for example, of advertisements which suggest that if one wears a particular type of eau de cologne one will be very much more attractive to women."trust, credulity or lack of experience of a consumer, or influences or is likely to influence a consumer or the public in general in any other improper manner"
Or to men.
Or to men. I am trying to promote the equality of the sexes. It would perhaps be a harsh interpretation of the law to have someone in court on that basis, because it seems pretty easy for almost anyone to get any advertiser into court under this directive.I think that there is a general case for saying that all advertising of consumer goods may be bad because it promotes possession as something absolutely necessary in our modern society. Some people say that violence on television begets violence in the streets. It is equally possible to say that the stress on possessing worldly goods in television consumer advertising produces theft in the streets.
The case seems to me to be equally strong. If one is to go into the fundamental basis of the morality of advertising, one should consider whether we should be much more strict about it, whether in some cases we should ban it and to some extent try to limit the material basis of our society. Of course, as was said earlier, the effect of this advertising is to make persons who cannot afford what is advertised often permanently unhappy and feel at a gross disadvantage compared to the rest of the community.
Before the hon. and learned Gentleman leaves the point of describing the effect which advertising may have in an ethical and moral sense, may I ask what he feels would be the result if we asked for editorial matter on television to be subjected to the kind of code and scrutiny to which advertising itself is subjected?
Editorial matter is carefully excluded from this draft directive, and that is right. However, having made observations about the morality of commercial advertising, with its stress on consumer goods, I none the less have to accept that this directive and the present self-regulatory practice proceed on the basis of the existing system. Therefore, one has to accept that one is dealing with an existing system and that nothing said tonight will materially affect the right of advertisers to advertise consumer goods in the way in which they have always done so, namely, with the basic essential desire to get people to buy more of their goods. So we are looking at advertising in a much narrower and limited way.The directive involves new laws and new offences, and makes access to the courts easier. It could be an engine for the embarrassment of commercial companies by persons who wish to embarrass them, including competitors. They could be got into court very easily, and on the principle that there is no smoke without fire great damage could be done to companies even when they were eventually exonerated by the courts.
Particularly Saatchi & Saatchi.
My hon. Friend the Member for Grimsby (Mr. Mitchell) says "particularly Saatchi & Saatchi" but I know that he does not mean it. For all those reasons, I think that we should be very cautious with this type of directive. We have the ability to put our own house in order and no great harm will be done to the Community if advertising law is not the same in all the member States.
As there seems to be a wide measure of agreement on this draft directive, I shall be brief. I listened with interest to the hon. Member for Newham, South (Mr. Spearing), who said that those of us who supported British entry into the EEC were guilty of unfair and misleading advertising. It then transpired that he had been guilty of the same in that he suggested to one of his hon. Friends that milk bottles might change size when we joined the EEC. He was worse because he tried to make his appeal based on fear.This is not the first occasion that we have discussed draft Community documents this week. Indeed, this is the second occasion that there has been an official Opposition amendment expressing serious reservations about a directive. On Tuesday we had the directive on the display and pricing of foodstuffs when the Opposition amendment said that the directive would
Today we have an official Opposition amendment on this directive which says"… run counter to consumer protection measures in the United Kingdom and would impose extra costs upon the relevant trades as well as upon the consumer."
I make one general point about the question of directives. I am sorry that the right hon. Member for Down, South (Mr. Powell) is not here. I listened with interest to what he said on Tuesday when he was commenting on what my hon. Friend the Member for Pudsey (Mr. Shaw) had said. Both these measures are designed to protect the consumer, although this one seems to go further in that it also deals with unfair advertising, which, as the Minister said, seems to deal more with unfair advertising between competitors. But, generally speaking, these directives are designed to protect the consumer, and that by itself is not sufficient to justify a Community directive. 1t must go further than that—it must be within the spirit of the Treaty of Rome. First, it must be shown to affect intra-Community trade in some way or another. Both these directives illustrate another point that was made by my hon. Friend the Member for Harrow, East (Mr. Dykes)—that they should be concerned with the end and not the means, with the principles and not the methods. When one gets into the area of the methods, one runs into difficulty, as is particularly well illustrated by this directive tonight. The right hon. Member for Down, South said on Tuesday night:"that in its present form it is not acceptable to the United Kingdom, as it seriously undermines the existing system of self-regulation."
"The Opposition give as their objection to the documents as they stand—the directives as they are at present proposed or used to be proposed—that they would run counter to consumer protection measures in the United Kingdom.
I do not think that that was a proper inference from the official Opposition amendment. The criterion for determining whether a directive is intra vires the Treaty of Rome is straightforward enough—that is, to determine whether it is in accordance with article 100. In other words, does the matter directly affect the economic functioning of the Common Market? Does it affect intra-Community trade in any way? Is it designed to deal with imperfect competition between member States? Therefore, I believe that the right hon. Member's interpretation was a case of wishful thinking. On the other hand, if we find a directive which runs counter to United Kingdom measures but also affects the functioning of the Common Market, I think that the Opposition will certainly support it, and I believe that the Government will too. We shall have an example of that on Monday, when we debate the Companies Bill, the first two clauses of which are concerned with implementing in detail the second EEC directive on company law. However, as I say, if we apply that test to this directive, it is found wanting. I want to refer to the evidence given to the House of Lords Select Committee on this matter on 5th April. Incidentally, if there is no other justification for the existence of the House of Lords, this kind of report certainly is. It is very impressive. The Select Committee went into this directive in great detail, covering every aspect. I think that we would generally agree with most of its conclusions. The Committee was told by the Department's representatives:Is it the view of Her Majesty's Opposition that we should not accept legislation of the Community which runs counter to … measures in the United Kingdom?" —[Official Report,14th November 1978; Vol. 958, c. 315.]
It is therefore clear that the directive fails the article 100 test. It also fails the article 189 test, in the sense that it goes beyond ends, talks about how the ends will be achieved, and spells out the means in detail. Article 189 says that a directive shall concern itself only with the result to be achieved, not with the form and not with the methods, which should remain discretionary. Inevitably, in a Community of nine—soon, one hopes, to be enlarged to 12—if one becomes involved in methods, one will run into difficulties. It is precisely on this point that this directive does so. It introduces a class action, which is totally unheard of in English law in this context. It introduces an injunction without proof of any damage having occurred or proof of fault. It introduces the new concept of the mandatory corrective action and it introduces a fine or a penalty which is apparently unrelated to the damage caused. As the hon. and learned Member for Bradford, West (Mr. Lyons) said, it also introduces, which is not totally unheard of but would be unusual in this context, the shifting of the burden of proof from one side to the other. Therefore, in general, the whole matter is far too theoretical. It fails to take into account the practical situation in the United Kingdom, which is one of cheap and effective self-regulation. While it may not be perfect, that system seems to work very well as far as it goes, and, so far as the present arrangements are ineffective, they should be used as a base for strengthening the self-regulation and possibly, if necessary, introducing some statutory support as a last resort. We do not want an effective system of self-regulation to be undermined by this directive. As has already been said, a number of things ensure that most advertising remains domestic—by definition. Language, ethnic characteristics, even a sense of humour, all vary from one country to another. It is therefore not possible to have an international advertising campaign in the sense that one simply produces one advertisement which appeals to people across international boundaries. It does not work like that and, in many cases, a manufacturer even has to change the name of his product. I am not sure what will happen to the directive now—the Minister was not clear about that—but I assume that he is saying that it should either be withdrawn or else amended so substantially as to be unrecognisable in its present form. There might be some case for dealing with the principles we seem to be agreed on, and I should be interested in the Minister's views."we have no evidence whatsoever that there is any impediment at all to intra-Community trade as a result of the differing practices as now conducted."
First, I apologise for not being present for the Minister's speech; I was out of the House for a short time. Secondly, I intend to be brief, because, after nearly five years in this House, I have just discovered that if one speaks for less than eight minutes, it is not held against one. Since I wish to speak on the Social Security Bill next week, I do not want to fall foul of the Chair.
The hon. Gentleman has had more than eight minutes this week.
I came in only to raise a couple of points, but while I have been sitting here many more have occurred to me.Both amendments on the Order Paper imply that the present system of self-regulation is satisfactory. I do not agree. I do not think that the ASA does a good enough job. There are plenty of examples of ways in which my constituents and others are misled by unfair and untruthful advertising. They are ripped off to a great extent in the secondary finance markets of banking, second mortgages, and loans. They are not told the truth about the repayments. The advertising is misleading by any strtech of the imagination. We have had to introduce legislation to cover some aspects of this, and not all advertising is "honest, decent and legal" which, I think, is the current slogan. Much of it arouses entirely hopeless aspirations among people about what they can gain if they accept the product being advertised. Earlier in the debate there was reference to eau de cologne-type perfumes. I think that in technical terms the consumer has an association of ideas. The advertisement plants the seed of an idea which causes people to buy the product, but they then discover that the product does not make them like James Bond. This highlights the great problem of the latter part of the twentieth century with its materialistic society.. We have often seen films made abroad, perhaps in Third world countries, showing colour television screens in hovels advertising the goods of the twentieth century. We see high-speed automobiles being advertised in countries where roads do not exist, and books and literature being advertised in countries which are without proper education. That sort of advertising builds up false aspirations and causes people to become bitter, and that in turn causes them to become violent. I know that I have stepped over the bounds of the debate by referring to other countries, but a similar situation exists here. I come now to advertising on the basis of fear. I have a specific question concerning safety equipment. I refer not to seat belts but to safety equipment in factories. This includes helmets, toe protector boots, and so on. The only way in which workers in some factories can be induced to wear safety equipment is if they are shown the results of what happens if they do not wear the equipment. The results of not wearing the equipment can be catastrophic. It is often not just a matter of a finger or the tip of thumb being lost, but of losing half a hand or an arm. I would not wish to detail some of the results of factory accidents that I have seen, because they can be most unpleasant. The Royal Society for the Prevention of Accidents and the British Safety Council have had to use horrific posters about factory safety equipment. They are far more horrific than anything hon. Members have seen in advertisements about wearing safety belts. The advertisements on the backs of buses are like a vicar's tea party compared to what has to be used in industry. It is only fair to say that the manufacturers of safety equipment are selling their goods to make a profit. That means that they arc covered by all parts of the directive. I hope that my hon. Friend will deal with this aspect. I wish now to deal with the question of animals. Offering membership of a hunt or blood sports association is a service just like any other. People are offered membership of a club or society which will provide titillation for human beings when they see animals being torn to pieces. Some of the advertising to counteract that has to be based on fear. It is done in such a way that it strikes fear into the heart of any thinking human being and carries the message that he or she should have respect for other members of this planet—the animals. Is any of the advertising used by the anti-blood sport societies to be covered by the directive? If it is, that is not good enough. That point must be met. One other aspect is mentioned in the last paragraph of article 8 on page 15. It says:
It is the last part of that paragraph to which I want to refer. I have never been on the receiving end of a telephone advertisement. I should not want this practice to become widespread in this country, as it is in America. I understand that certain hon. Members, one of whom is sitting not far away from me, have used this technique as a way of reaching constituents. I do not think that this ought to be allowed to become widespread. I would like to see statutory controls on the use of telephone advertising. The directive is fairly widespread in its definitions and embraces the operation of advertising in its widest sense, including public relations. There are people who walk this place, the public relations lobbyists, who buy up hon. Members to press forward a certain case. Are they covered? Are those who put forward false prospectuses covered? Would they be caught by the definition of unfair and misleading advertising? Would those lobbying hon. Members be within the definition? Are those who seek to sell shares or float a company covered by the definition? They are selling a stake in a company. It is a service. They are selling a commodity, a share. Earlier this week I raised in the House the issue of the National Enterprise Board spending £6½ million of public money to buy Allied Investments, having been sold it by Sir Richard Marsh on the basis of what appears to be a false prospectus. Would that sort of advertising be covered by this directive? Before you came into the Chair, Mr. Speaker, one or two hon. Members had raised the question of governmental advertising in its widest and narrowest senses. Article 5 presumably relates to party political advertising. I have here the front page of the Daily Mirror for 7th September. During the recess we lose our platform in this place. I kept this by me. At that time we were contemplating going into a busy period of electioneering and I put this on one side, believing it to be material of which I could make use. The headline says:"More exacting provisions may be justified as regards the advertising of certain products, e.g. narcotics, weapons, medicines, tobacco products and food or as regards advertising through certain media, e.g. on television or by telephone."
We all remember the party political broadcast put together by Saatchi & Saatchi. The comment of the Daily Mirror was:"How Tories Faked Granny Annie".
That advertisement was surely misleading and unfair. That is how I would define it. The Daily Mirror went on:"The current Conservative political broadcasts and advertisements are slick, shabby, deceptive and dangerous."
Such nakedly untruthful political advertising ought to be covered by such a directive. I would prefer that statutory control was based in this country. I notice that none of the political parties is mentioned. It may be claimed that that is because the political parties are not covered. But the CBI is there. What is it advertising if it is not pro-Tory, anti-Labour policies? What is the difference between that and political advertising? I could make a speech on every item in this directive. However, Mr. Speaker, as I wish to catch your eye during the Second Reading debate next week on the Social Security Bill I shall draw my remarks to a close."And 'poor Annie' a pensioner, is really called Sarah, not all that poor, and a member of the Chelsea Conservative Club."
I thank the hon. Member for Birmingham, Perry Barr (Mr. Rooker) for reminding the House that, if a speech lasts for eight minutes or less, when I am recording speeches the following morning I do not enter it. I regret to tell the hon. Gentleman that he was two minutes over that period.
I think that I am the only contributor to the debate so far who must begin by declaring an interest, because I am the only Member of the House who is also a member of the Advertising Standards Authority. As I have been a member for a little less than a year, I shall not attempt to parade in this debate as an expert on the workings of the authority, still less as its spokesman—which I am not.Let me make one point clear to the hon. Member for Birmingham, Perry Barr (Mr. Rooker). Although I, and indeed many other members of the authority, have certain anxieties about aspects of the way in which the authority works—and we can all think of ways in which it can be improved—the hon. Gentleman's criticisms of the authority rested on his asking the authority to do what amounts to a political job. He was asking that body to change the nature of our society. If he wants to change attitudes towards the possession of goods, he must press that case here in the House of Commons rather than complain that the ASA is unwilling to take on that task on his behalf. I wish that my hon. Friend the Member for Harrow, East (Mr. Dykes) were still present. Although I largely agree with his remarks about the Community and the absurdity of attempting to pretend that this kind of objective destroys the validity of the Community as a concept, I must point out that, even to those of us who are pro-EEC and who have been consistently of that view, the fact that this kind of nonsense is continually being talked makes us tear our hair out. Whoever thought that these proposals could have been justified within the terms of article 100 should have had on his desk a little notice to be read every day to the effect "What good will these proposals do?" If the draftsman had borne that advice in mind, we might well not have had these proposals at all. I do not see how it can be argued that these proposals could significantly affect the nature or quality of competition within the Community. I can assure the House, drawing on my experience in the authority, that we take exactly the same line on advertisements for German, Italian or French cars as we do with British cars. If we do not think the advertisements stand up, we rule them out. What matters is that there should be fair treatment within the market. I do not think that any other view on that aspect can be seriously sustained. In view of the amount of unanimity on this topic on both sides of the House, it hardly seems necessary to develop arguments at great length, and I do not intend to do so. I am taking part in this debate only because I occupy my present position on the authority and therefore I speak with a little experience. Furthermore, I believe it is important that when the Minister is in Brussels he should have the clearest possible demonstration of widespread concern in this House because of the opposition to the terms of this directive as it stands. I wish to make two points. First, I see no reason to doubt that if this directive were to go through in its present form, and if we were forced to conform to it, although it says that the statutory system would run in parallel to the voluntary system, it would result in the destruction of the voluntary system. I do not believe that the industry would be willing to spend £500,000 or more a year financing the existing self-regulatory system. When the hon. Member for Perry Barr suggests that the industry finances this system, I must tell him that it operates on an independent basis. The members of the authority are appointed by the chairman, and the chairman is normally a person of considerable independent standing, as indeed is Lord Thomson of Monifieth. Therefore, there is no question of our being financially dependent in a day-to-day sense on those who ultimately provide the money. I do not see why the industry should be expected to finance a self-regulatory system, or indeed that it would be willing to go on doing so, if this in itself were no bar to a parallel system of statutory enforcement and if there could be no protection against legal action, regardless of what was found by the ASA or any other part of the self-regulatory system to be an acceptable advertisement. Similarly, as many hon. Members have said, it cannot be denied that there would be involved in this draft directive substantial change in our legal procedures, which is open to objections of the kind mentioned earlier. I do not regard either of those points as conclusive in themselves. I happen to believe that it is true that it would destroy the self-regulatory system, but that is not an ultimate objection under all circumstances. It is true that it would involve us in making changes in our legal system, but that is not a fundamental and conclusive objection. All of these things could and should be done if there is a good case to be shown for them. I have no doubt whatever that the net result of carrying through this directive would be less advantage and greater disadvantage to consumers. They would be faced with a system which would almost certainly be more expensive for them personally to get on the move. At the moment, all that it requires is the price of a postage stamp to the Advertising Standards Authority. It would certainly be slower, inevitably, as soon as the law and the courts and statutory definitions were involved. It would certainly be more expensive to the industry because of the legal costs that would necessarily arise. That in itself would lead to extra costs to the consumer. Most important of all, I am quite convinced that it would give the consumer less protection. I was glad to hear the Minister laying a good deal of emphasis upon that point. I have in my hand a copy of "The British Code of Advertising Practice". This is the old version. It is currently being revised. It runs to over 60 pages of quite close print. Anybody who attempted to turn it into the form of statutory instruments would have a volume of a size which most of us could not even carry physically into the House. Nobody would, in practice, try to do it. It would become an impossible nightmare task. What one would set out to do would be to have much more limited objectives than are contained in what is inevitably the relatively loose—it is as tight as can be, but still relatively loose —non-legalistic wording of the code. The Minister touched on the question of taste and decency. Of course, that is a classic case of the difficulty of translating into statutory language, whether one has endless space or limited space. However many words one wants to use, it can be very difficult to do. The Minister also emphasised the point, quite rightly, which is very much bound up with this, that a code of this kind can be based on the application of the spirit as well as the leter in a way in which a statutory instrument cannot. An interesting point emerged in what the hon. Member for Isle of Ely (Mr. Freud) said about the code in its relationship to children. I wish that he was still in the Chamber. If I recall his words roughly correctly, he said that there was nothing in the code about problems which might be created for children by showing them things which they and their parents could not afford. Since then, I have had a chance to look quickly through the code. I notice that in appendix B, headed "Children and young people," at section 1.3, it says:
There it is. The code does attempt to deal with that. I accept that it is not always easy, even for a self-regulatory system, trying to work within the spirit as well as the letter, to decide precisely which advertisements fall one side or the other of a line such as that. However, whereas the code can at least attempt to lay down a standard such as that, and a body such as the ASA can attempt to form a broad judgment as individual men and women as to whether an advertisement is acceptable within that context, the attempt to do anything of that kind at all by statutory instrument and arguing in court whether the advertisement for "X" product made a child feel inferior would be a hopeless task even to begin. It could not be done on a statutory basis. I was glad to hear my hon. Friend the Member for Pudsey (Mr. Shaw) refer to the report of the Office of Fair Trading. It is a surprisingly clearcut endorsement of the general effectiveness of the self-regulatory system. My hon. Friend said—I do not dissent from this as an individual or as an individual member of Advertising Standards Authority Ltd.—that in due course a need may be demonstrated for additional forms of legal backup. We should be cautious before rushing to look for new forms of legal back-up. We would not have to go very far down that path before running into the objection that everyone with one exception, namely, the hon. Member for Perry Barr, had seen to the draft directive. There are those who are often said to reflect the need for statutory back-up—for example, the fly-by-nighters distributing handbills and those whom we can never quite track down who place a one-off advertisement in the classified columns of the local paper. The problem is that we would not catch up with them if we had legal back-up. There are many in our society, including those who flout planning procedures, against whom we have plenty of powers and statutory back-up. Again, the problem is catching up with them and enforcing the statutory back-up. I have in mind the unscrupulous trader who descends on an area for one day and indulges in an unscrupulous practice before flitting off to another town some miles distant. The self-regulatory system may not be able to cope with that sort of activity; but neither would statutory back-up powers. There are some practices that the self-regulatory system seems unable to deal with, but it is unrealistic to think that there is some magic statutory cure. Often these are the problems that statutory cures have not been able to deal with satisfactorily."No advertisement is allowed which leads children to believe that if they do not own the product advertised they will be inferior in some way to other children or that they are liable to be held in contempt ar ridiculed for not owning it."
Will the hon. Gentleman add to the list those in Ireland who send through the post bogus trade directory invoices in the hope of getting British business people to pay for nonexistent entries in non-existent trade directories? Is he aware that nothing much can be done because these people are operating from Ireland? There is nothing in the directive to help us in that direction.
I am grateful to the hon. and learned Gentleman, because that is a good illustration of the practice that I had in mind. There are many activities that go on in any society that we would all like to clobber. If we could find the right law to do that, we would be prepared to enact it. However, enforcement is not the same as enacting. We do not have jurisdiction over everything even in this country, let alone Ireland.Although the self-regulatory system has not solved all our problems, we must not think that a move to any significant extent down a statutory path would necessarily solve all the problems in a different way. On one rare occasion we can congratulate both the Government and the Opposion and wish the Government well in their efforts in Brussels to ensure that this silly directive does not go any further in its present form.
It is with pleasure that I take up the arguments of my hon. Friend the Member for Braintree (Mr. Newton). I congratulate my hon. Friend and, through him, the Advertising Standards Authority on behalf of the advertising industry, in which I declare an interest as a person who works in advertising, on behalf of all British consumers on protecting them from being misguided by advertising. The protection that it offers has become the envy of the world.I agree with the objectives of the European Community and I agree with the objectives that I think the Commissioners had in drawing up the documents now before us. However, that is a different position to hold from agreeing with the methods that they suggest for carrying them through. Advertising throughout the Community should be seen to be, and appreciated as being, honest and truthful. Advertising should be created and used throughout the Community to further rather than to interrupt free and fair competition. That must be seen in the context of the control system that we have in this country, of which I think we may all be genuinely proud. Our system is a combination of self-regulation and statutory regulation, backed up, in the broadest terms, by business law. It stands comparison with anything anywhere else in the world, and the directive would cut through to the core of that method. It has been particularly pleasing to have published today by the Office of Fair Trading an endorsement of our system. As the hon. Member for Birmingham, Perry Barr (Mr. Rooker) pointed out dramatically, the system is not perfect. Though it is speedy it could probably be speedier. Though it is cost effective, virtually eliminating all seriously mis- leading advertisements, it could probably be more cost effective. Though it is flexible, it could probably be applied with greater diligence and flexibility. However, it is certainly continuously evolving in a way that would not be possible if it were legal writ. All this is being put at risk by the Commission's suggestion of harmonisation for harmonisation's sake. The Commission refers to corrective advertising, but that has not been mentioned in the debate so far, although it has been referred to by the Secretary of State and, perhaps, by his Minister of State. It seems to be part of the thinking about the control of advertising and there are some misconceptions about it which should be put right. On the face of it, the thought of powers being given to force the seven in every 100 advertisers who are identified in the OFT report as having used misleading advertising to put their case straight by publishing countermanding statements is attractive. It should be appreciated that those seven in every 100 are not all dramatically misleading advertisers. It would be unkind to them to say that. Only about half of those are misleading. The rest are in breach of details of the code, such as not putting all the elements of an address on a coupon. We are not talking about 7 per cent., but about 3 per cent., and even that figure would be reduced in any objective assessment of what might be considered as misleading a reader into doing something that proved to be against his interests. Even corrective advertising by this very small group would not be certain of success. It has not worked well in other countries which have adopted it, particularly France and the United States, and, crucially, it has not worked well for the consumer. Indeed, in the United States it is not even considered as something which is done to benefit the consumer, but as a measure against unfair competition and against an advertiser who has gained an increase in market share or sales volume through the placing of deceptive advertising. We must also accept the near impossibility of reaching through corrective advertising the same people who saw and were influenced by the original advertisement. Whether they are reached or not, there is an inevitable time lag between the original message and the corrective advertising. If the corrective advertising is not seen by consumers who were misled and does not correct the misapprehensions of those influenced by the original message, its general effect is to discredit the advertiser in general terms and to undermine the credibility of advertising as a whole, which will do no one any good and will put further into jeopardy the efforts of industry to achieve the regeneration which both sides of the House urge upon it. There is another argument against the introduction of corrective advertising. It concerns the freedom of the press. To put corrective advertising into practice, there must be a power in the court, or a Government authority, to order the correction so that the media are obliged to accept it. This would be seen to infringe the freedom of the press, particularly as there could be resistance to the acceptance of certain corrective advertising which threw doubt upon the honesty and acceptability of the majority of advertisements carried in the medium. The Secretary of State has recommended consideration of corrective advertising. The EEC directive firmly suggests such a course. I have tried to indicate how it has been investigated, so the Secretary of State suggested, and how it has been found wanting in other countries. It would be unwise for the European Community to go down that path. The directive on misleading advertising really needs what the Minister has suggested and what the Commission has already accepted—a rethink. It smacks of harmonisation for harmonisation's sake. It is not best suited to methods that would lead to the best standards of advertising throughout the Community. It does nothing to underpin the methods practised here. Few people could argue against a measure which was designed to bring everybody in the Community up to the same standards in advertising as consumers have in this country. If the Commission has the good of consumers and manufacturers in mind, it should revise the directive to give it the character which is inherent in our standards of advertising. In spite of some of the comments made by Labour Members, our advertising can, more than any other in the world, be described as legal, decent, honest and truthful.
I declare an interest as a director of two advertising agencies. It is a pleasure to follow my hon. Friend the Member for Lewes (Mr. Rathbone) and I agree with what he said about corrective advertising. The suggestions that have been made tonight are worthy of careful study and they have the support of the majority of those who take a responsible view in the industry.I was disappointed to have to listen to the second speech this week which exceeded eight minutes by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I accept that that is a cross that I must bear. I was reminded of what was probably the most deceitful and untruthful campaign in political history which was conducted under the heading of "Yesterday's Men". Perhaps the hon. Member for Perry Barr should remind himself of that because it left a rotten taste in everybody's mouth. He has no reason to be proud of it. The directive is of interest to all who work in the industry. Anybody who has worked across the member States knows that throughout the Community we should have advertising which is of an equally high standard, regardless of which country is involved. Free and effective competition in advertising should help us to acheve that end. The directive must be viewed against the background of two matters: first, what exists in the member countries at present, and, secondly. how it stacks up against harmonisation for harmonisation's sake. The first point that several hon. Members have made is that we have a strong self-regulatory body which is putting in £500,000 of its own money, not somebody else's money. It is the industry that is putting in that money. If more money is needed, I think that the industry will respond, but if there is a sword of Damocles, if the code is considered to be irrelevant and the courts are to act, the industry must question whether that money is wisely spent. In terms of television, the control that is exercised by the Independent Television Companies Association is, I think, one of the most stringent in the world and meets already a fair number of the points in the directive. No hon. Member should be under any illusions. This is the most intrusive and persuasive medium and the one most likely to do the damage. I have had the privilege for many years of advertising not only in this country but also in France, Germany, Italy, Holland and Belgium. From my experience, I cannot see in what way the consumer or competition has been adversely affected. I have never come across factors in the market which prevent the necessary degree of fair competition. Several hon. Members made the point that international advertising is not a feature of today's world. With respect, that is not entirely true. There is an increasing incidence of campaigns being created in one country. Admittedly, they are put into another language, but the basic copy point is kept common, and the basic message is quite often kept common. I think that we shall see this developing over the next few years. It is not something that is declining. We should not delude ourselves that there are not pan-European campaigns, because there are. We think that article 5 in the directive is totally unacceptable and misconceived. The Minister made the point in his opening speech about collective bodies taking action. We all know from our own political lives that there are particular little caucuses of one persuasion or another. We may agree with some of them and disagree with others. But we think that article 5 is dangerous in opening up certain opportunities. I take a slightly different view perhaps from the Minister on article 6. Indeed, I take a different view from that expressed in the various briefing documents which have been sent to me. I give the example of the ITCA. If an advertiser is advertising a product on television and wishes to make a claim, the onus is on him to substantiate that claim. I recognise that in law the onus is the other way round. In the agro-chemical industry there is a very strict code of practice for advertisements which appear in the press, principally directed at the farming community. There again the onus is on the advertiser to prove that his claims are valid. Woe betide him if they are not. I utter a word of caution to those who would totally reject article 6. I think that it is something that we ought to move towards, and something that many parts of the industry—
Under article 5 the courts are enabled to make orders without proof of fault. This probably raises more objections than the practice which already obtains under the advertising code and the Independent Broadcasting Authority code.
I am grateful to the Minister. He is right to point that out.This is an important directive because it has to do with competition and free competition throughout the Community. The advertising industry is a dynamic one. We are part of the dynamic end of the marketing mix, and I believe that the vast majority of the people who operate in it throughout the Community are decent and truthful. They use their skills and abilities to communicate to prospective purchasers the benefits of the products they wish to sell in a way that they judge will motivate people to purchase them. We run a very grave risk with the system we have in the West if we put too many restrictions on that dynamic element. We have a strong code. There may be areas in which there is room for strengthening it, as several hon. Members have said, but I think that the code is a great step forward. It has been built up over many years. I hope that the Minister will feel fortified, when he sends his retort to the Commission, in pointing out that we have already gone three-quarters of the way along the road that the Commission wishes us to take.
I think the House will agree that we have had a full and informative debate on this directive. The House will also agree that there is unanimity on how we view it. There is no need for me to rehearse the reasons why we do not find it acceptable.In my brief summing up of the debate, I should like to draw attention to three matters. First, we must accept that advertising is a vital part of the selling process. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) could rightly articulate his views against the aggressive tendencies of some advertisements or what he considers to be the unfair aggression of some advertising. But I think that equally he would be the first to complain if, as a result of failing to sell goods, there was a shortage of manufacture and, in consequence, a shortage of jobs. It is not possible to disentangle advertising from selling and selling from jobs.
It is a question of practice.
The question of practice concerns the hon. Gentleman as much as it concerns us.However, it is no excuse to say that, because one finds advertising aggressive, it should be contained within statute law. We seek to ensure that certain advertising is controlled within a regulatory system which allows its competitive edge to be cutting and its sales to be successful. That was what my hon. Friend the Member for Northampton, South (Mr. Morris) was setting out. The question of maintaining the importance of advertising as the selling weapon of the United Kingdom's marketing effort must be common ground between us. The second point concerns public confidence. I think the Minister understands that the Director General of Fair Trading in his report has given a substantial clearance of the advertising system regarding public confidence. That is an important development to which we should pay substantial respect. A number of bodies—consumer bodies among them—feel that the scale of potentially misleading advertising is great. The proof in today's report suggests that the scale is very small. Public confidence is the name of the game, and with it goes responsibility. It is the responsibility and the mechanism by which we carry it out which brings us into conflict with the directive. Many hon. Members, particularly my hon. Friend the Member for Braintree (Mr. Newton), who as a member of the Advertising Standards Authority Ltd. has a particular interest, have shown that the responsibility with which the Advertising Standards Authority Ltd. executes its work is of the highest and should command public respect. That brings me to my final point. The House may know—the Minister certainly will—that Commissioner Burke is here tonight and tomorrow will no doubt attend the Advertising Association's luncheon. That may be one reason why the Government selected this evening to debate the directive. But it would not be fair to ascribe authorship of the directive to Commissioner Burke, because it was in train long before he took over his responsibilities. It is right that the House should express its unequivocal view that, as regards this directive and the unit pricing directive which we discussed recently, both the Government and the Opposition are of the firm conclusion that the way in which the EEC is seeking to regulate activities involving unit pricing and advertising is wrong. I ask the Minister, if he has the opportunity of meeting Commissioner Burke—I suspect that he may have that opportunity—to impress upon him two simple points of view. One is that the United Kingdom has a long history of effective consumer protection measures, many of which depend upon voluntary systems and codes of practice. We have grown up with codes of practice and we support them. On the whole, to the largest possible degree, industries accept them. That is the natural way in which we seek to control our commercial practices. It is the kind of approach that the Commission would do well to examine before it comes forward with legislative counterproposals. The second thing the hon. Gentleman could well say to the Commissioner is that when it comes to discussing matters of consumer protection, which, after all, do not flow directly from article 100—they were brought together by the Council as a separate body of intention and are not necessarily derived from the Treaty of Rome—it would be far wiser to go into a discussion document phase, such as the chairman of the National Consumer Council, Mr. Michael Shanks, outlined the other day. We should have a Green Paper phase, as I described it on Tuesday night, before we get involved with the niceties of legislation and the details of law embodied in these articles. I think that the debate will have achieved a great deal if the Minister gives the House an indication that he views consumer protection measures from the Community in that light and that he will seek to persuade the Community to look at them in that light. The debate set out to deal with the advertising directive. We have dealt with it. It set out to enhance the self-regulatory system and, backed by the report from the Director General of Fair Trading, we have dealt with that. We know that there are abuses and that within the United Kingdom there are ways in which we can legally sort them out, if the industry and the Department agree. But what we must have for the future is a slightly more intelligent way of dealing with proposals for consumer protection emanating from Brussels. If we can achieve that tonight, we shall have achieved a great deal.
With the leave of the House, Mr. Deputy Speaker, I should like to reply to the debate.I begin with the last point raised by the hon. Member for Pudsey (Mr. Shaw). I had discussions with Commissioner Burke some months ago, when one of the points we discussed was the Green Paper approach—that is, having a document that would briefly state the mischiefs, the objectives and the sort of procedures that might deal with the mischiefs. We could start with that approach rather than the detailed legal language of a directive, which I think frightens and concerns many of those who read it, although I think that they sometimes become too neurotic and concern temselves too much at this stage of the game. I should emphasise again that the proposal before us was not initiated by the Commission on its own. The Commission was invited by the Council of Ministers in 1975 to produce something on advertising in the nature of a directive. It responded with a form of directive that we find unacceptable, but I do not criticise the Commission strongly for that. It has produced a first draft. The draft is then submitted for an opinion of the European Parliament, an opinion of the Economic and Social Committee. We have here a draft that has not yet come to any discussion by Ministers or their officials. Therefore, it is particularly valuable to have this debate at this time—much more valuable than having a debate when the discussions have got half-way through the Council. I think that the content and quality of the speeches will be of great assistance to the United Kingdom. I shall not repeat the agreements that we seem to have reached this evening, but the timing is particularly fortunate. I think that the hon. Member for Northampton, South (Mr. Morris) used the phrase "retort to the Commission". I do not think that that is an appropriate phrase at this stage. It is not a retort; it is a comment. The speeches on this subject, particularly at this stage of the proceedings, are read very carefully by the Commission, and I am sure that it will take full note of the points that have been raised. I am particularly grateful for the thoughtful, constructive and helpful speech of the hon. Member for Pudsey, who strayed beyond the directive to comment on the existing voluntary system and whether it was perfect, a reflection that was shared by other hon. Members. I have spoken in praise of the voluntary system and the Advertising Standards Authority code. Nothing in those remarks implies that there is perfection. I do not propose to go any further than that. There will be other occasions on which we can look at the nature of advertising control in this country. I firmly believe that the voluntary system and the codes of practice are central to it. I do not impute perfection to it. We can discuss those matters on another occasion. I do not think either that this is the right time to try to achieve, let us say, a definitive definition of the word "fear". The House is obviously agreed that some advertising which appeals to fear or to real and apprehended danger, such as advertisements designed to stop people smoking or to wear seat belts, is desirable and that advertisements which appeal to people's sentiments or fear by trying, for example, to sell them hearing aid devices in disreputable circumstances are wrong. They are wrong if they appeal to fear where other types might be right. The only lesson that I want to draw is that within a code it is possible to draw that distinction and to draw it according to the real circumstances which people face from day to day. If we try to translate that sort of task into a statutory instrument or into primary legislation and if we then entrust that task to lawyers and judges to interpret after legal argument, that is when the system starts to break down. Therefore, the discussion about fear is perhaps not helpful in arriving at the right definitions, but it is helpful in illustrating that a code is a better way to deal with these matters. The same is true of the arguments about the burden of truth. When one comes to article 6, within the context of a code it is helpful and right for consumers to say that if a manufacturer or advertiser makes a specific factual claim that product X will cure Y, there is no reason why he should not be put to the proof of that. But, again, it is much more easily done in the context of a code. I end on the subject of harmonisation. There is no possible harmonisation at present of matters which militate against competition within the Community. That would be an absurd claim for the directive. The Commission was invited by Ministers to achieve some degree of harmonisation in the objectives of member States in the broad protections which they give to consumers and in raising the general standards of ethics—the general standards of the advertising industry. That sort of harmonisation has nothing to do with trade in the strict sense of the word or with competition, but it raises the general standards for consumers and it does it by comparable ways in different countries without exact uniformity. That is a form of harmonisation to which I do not see any objection. I am sure that, in the light of this debate, the sort of harmonisation of broad objectives which does not create the difficulties which hon. Members have mentioned can be achieved, and, I am sure, all the better achieved as a result of the comments made here this evening.
Amendment agreed to.
Main Question, as amended, put and agreed to.
That this House, in taking note of Commission Document No. R/511/78 on Misleading and Unfair Advertising, considers that in its present form it is not acceptable to the United Kingdom, as it seriously undermines the existing system of self-regulation.
South Woodford (Subsidence)
Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Tinn.]
About five years ago, in 1973, the Department of the Environment, as it then was, began the construction of a major trunk road in South Woodford, in my constituency, the relevant part of which is known as the Grove Road improvement. It involved excavating a cutting running east to west wide enough to take a three-lane dual carriageway, a central reservation and two slip roads, and deep enough to allow the biggest lorries and buses to pass under the roundabout at one end and the road bridge at the other.At the time the road was being planned and construction was about to begin, there was a public meeting held in an adjacent hall. One of the points made by the Department's spokesman and the engineers was that if, during the process of excavation, any of the residents began to notice any cracks in their houses, they were to draw the matter to the attention of the engineers or contractors as soon as possible. It did not take long. About two years later the owners of a number of adjacent houses to the south of the cutting began to see signs of subsidence, very slight at first but becoming progressively more serious as the months passed. Cracks began to appear in the walls of their houses; door and window frames began to distort and jam; doorsteps broke away from the walls against which they were fixed; and concrete paths began to fissure. In the silent hours of the night, residents could hear their houses creaking as the subsidence continued, slowly and inexorably. The evidence over the months mounted. Today there are quite a number of houses in roads in this part of South Woodford —Hillcrest Road, Grove Hill, Craig Gardens, Washington Road, and Grove Crescent—in which the owners are now facing bills running into thousands of pounds in order to stop their houses from falling down. One of the cases with which I have been most closely concerned is that of Mr. J. F. Turner, of 25 Hillcrest Road, and I have been pressing his case on the Department since he sought my help in July 1976. He first noticed the cracks in the downstairs bathroom of his house in October 1975. It is part of his complaint that, although he wrote four times between October 1975 and July 1976 to the consulting engineers and the Department, no investigation was made into his complaint in that nine months. This point is important, because by the time I intervened on his behalf and the Department had appointed independent engineers to investigate the complaint we were in the middle of the worst drought of the century. Then, of course, it was too easy for the engineers to take a fairly superficial look and to conclude that what Mr. Turner's house was suffering from was nothing to do with the road works but was due to the drought. That is precisely what they did. But Mr. Turner, who is a very determined man, did not accept that. Not the least of the reasons for his reluctance to accept it was the fact that by then he had had an estimate for more than £6,000 to underpin his house and repair the damage. He was fortunate, and he was put in touch with an eminent firm of consulting engineers, Crowe Kelsey and Partners, who had been retained by insurers for some other party. They carried out a preliminary survey of 25 Hillcrest Road, and I quote two short passages from that survey:
It goes on to say:"It seems very probable that the damage has been caused by settlement arising from drying shrinkage of the clay subsoil or a major lowering of the ground water table for a gravel subsoil."
The preliminary report was shown to the Department, and I am bound to say that the Department was responsive. It suggested a meeting, which was held eventually on 7th February 1977 and was attended by, among others, Messrs Crowe Kelsey, Mr. Turner's surveyors, and the independent firm which had been retained by the Department. The outcome of that meeting was an offer by the Department to pay up to £300 for further investigations. The work suggested was the digging of trial holes around the house to expose the foundations in order to determine what had happened, and also to measure the movement which had taken place in the house. Meanwhile, the damage continued to increase through the winter of 1976 and 1977, and by January 1977 Mr. Turner had received an estimate for remedial work which was now £12,504. If I tell you, Mr. Deputy Speaker, that this house is a perfectly ordinary four-bedroom semi-detached house, built in 1933, and that until this road cutting was excavated at the end of the garden it had been entirely sound and stable, you can understand the anguish that all this is causing this resident and others in the road. In March last year, Crowe Kelsey and Partners carried out their full investigation, in two parts. One was on the house itself, and they also used evidence from test boreholes—but, as I shall explain, some hundreds of yards away. I have the report here. As one would expect from that firm, it is a very professionally written and prepared report, full of a mass of measurements, diagrams and figures. On the house, it says in essence that the cause of the settlement is compaction of the subsoil due to reduction of the natural moisture content. It says that it is unlikely to have been caused by the drought, for a very interesting reason. The drought naturally affects the subsoil nearest the surface, and obviously one would expect more evaporation from the surface of the soil to the south of the house, which receives the sun, than on the shady north side, which is nearest the cutting. If that had happened, one would have expected, and in the normal course of events would have found, the house to be tilting towards the sun. In fact, the house tilts away from the sun and towards the cutting. There has been more subsidence on the cutting side, to the north, than on the south side. This is the pattern the whole way along the road. Other houses have been surveyed as well. Crowe Kelsey conclude from this evidence that it is the cutting which is the cause of the subsidence, and not the drought, as contended by the Department. This evidence has been reinforced by the evidence from the boreholes. Perhaps I could digress to describe the geology of the site. The new road cutting cuts across the natural slope of the land, which runs south and west, towards the River Roding and the Thames. The area has long been notorious for springs and ponds, which have always abounded in Epping Forest. The water has always percolated downhill, through the fissures in the clay, towards the bottom of the valleys. The case which has been examined is that by excavating this new road cutting, across the face of the hill, across the flow, and putting in drains along the bottom of the cutting, as is perfectly proper for the building of the road, that natural percolating flow has been interrupted. North of the cutting, which I might describe as the uphill side, the water level has been unaffected, and there are no signs of subsidence north of the cutting, because the water continues to flow off the surface of Epping Forest and down into the cutting. But to the south, where lie the roads that I have mentioned and the houses with which I am concerned, it has been cut off. Consequently, the soil has been drying out and it therefore compacts, leading to settlement of the surface. The way to test this is by sinking bore-holes and comparing the moisture content in this land before the road was ever started with the moisture content after the cutting was completed. That is what has been done. The top 2 metres are ignored, because that is affected by climate. It is below that level—from 2 metres down to 7 metres—that is tested. If there were no difference, the answer would be that the cause was the drought and that the Department is right. But if there were a significant difference in the moisture content below the 2 metre level, the conclusion would be that the road cutting was to blame and the Department was liable. In 1969, as part of the planning of the road, a line of test boreholes was drilled before construction of the trunk road improvement. It included a borehole No. 8 which is quite near 25 Hillcrest Road. But the only test borehole which had been drilled for another investigation—there was, of course, no money for a test borehole for Mr. Turner's house—was about 400 metres away and adjacent to the original test borehole No. 4. The sum of £300 did not cover a separate borehole, so Messrs. Crowe Kelsey based their comparison on borehole No. 4 and the related adjacent new borehole. But the result was clear. Let me quote a short passage from the report. It states:"If, by digging a cutting 8m deep, the standing water table was lowered by a similar amount locally, this would have a very significant effect on the ground surface level which, in turn, would cause differential settlement to any building that is constructed on this surface. We believe this is what has happened in this case."
I have made a short calculation, and 28 millimetres per metre depth over a distance of 5 metres provides 140 millimetres contraction. That is almost exactly 6 inches subsidence caused by the reduction of the moisture content. That degree of subsidence at the surface is fully enough to account for the damage that is happening to my constituents' houses. Armed with this evidence, Mr. Turner returned to the attack, but it was to no avail. The Under-Secretary wrote to me very briefly on 5th September last year:"the clay is now drier than it was in 1969 between these limits. The average moisture content in 1969 between 2 and 7 m was 31.3% and in 1977 this had reduced to 29.4%. This we calculated would reduce the depth of a stratum of saturated clay by 28 mm/m depth."
That seems to me, in the face of the evidence that I have quoted, a pretty suprising statement. However, I was subsequently supplied with a copy of the technical advice by the Department's advisers, a firm called Building Design Partnership, and its comments on Crowe Kelsey's report. The kindest thing that I can say about those comments on Crowe Kelsey's report is that the more I read them the more they sound like the words of a professional man scratching around for arguments to bolster a weak case which he realises has been devastatingly disproved. What the advice says is most unconvincing. I shall not read it, but a measure of the lack of conviction that it has for me is that it sought to explain the fact that the house had tilted backwards rather than forwards by saying that the roots of the trees at the front had gone right under the house and were draining the moisture away from the back. Of course, there is not a shred of evidence of that. That is totally unconvincing. But the Department, somewhat to my surprise, has continued to rely on this and has continued to deny any liability. I do not think that that is good enough. The report makes the point that the evidence of the boreholes is quite inconclusive because, it says, they are too far away from the house in question. I therefore asked the Secretary of State why another borehole should not be sunk near to the original borehole No. 8, which is close enough to Mr. Turner's house to provide a much more accurate guide to the loss of moisture. Messrs. Crowe Kelsey believe that a test borehole near borehole No. 8 would establish the case that they have made even more firmly than has been done so far. So also does the borough engineer of the London borough of Redbridge, who knows the area well and, as a professional man, recognises all the difficulties of seeking to establish grounds for proving subsidence. In a letter to me, the borough engineer wrote:"The Department's technical advice is that none of the additional data produced provides evidence to substantiate Mr. Turner's claim that the damage arose as a result of the roadworks."
Of course, a new soil survey has been made, 400 metres away. The results are perfectly clear. There has been sufficient loss of moisture to lead to a fall in the surface of up to 6 inches. What is suggested here is that the survey should be done nearer the house. I have, too, the evidence of the warden of the Epping Forest conservation centre, a noted conservationist, Mr. Paul Moxey, who knows the area well. In a letter to me, he says:"it is very difficult to say that the construction of the under pass has lowered the water table. Without the determination of factual evidence, i.e. a new soil survey taken in the immediate vicinity of the original site investigations to compare moisture contents at present with those previously obtained, then any opinion must be considered speculative."
When I asked the Secretary of State to support a second test borehole adjacent to the Department's original borehole No. 8, he refused. In his letter he said:"the creation of a cutting as deep as that involved here would, in my opinion, be bound to lower the water level and cause movement."
With the greatest respect to the right hon. Gentleman, that is simply not true. In the report to which I referred earlier, from the Minister's own advisers, Building Design Partnership, there was included in paragraph 6 the following:"I have … obtained further expert advice This advice is, I am afraid, unanimous that further test borings would not help."
This is what I am asking for. The Minister's advisers recognised that more accurate data could be obtained. We could ascertain whether the opinion of Messrs Crowe Kelsey is right. Yet in his letter to me the Secretary of State says that he has had unanimous advice that such a move would not help at all. Which is right—what the Minister's advisers say or what the Secretary of State said in his letter to me? This issue is too serious for the Secretary of State to take refuge in evasions like that. The issue is intensely serious for my constituents, who are now facing substantial personal losses. Mr. Turner is an elderly man, in his seventies, and is in no way able to get a mortgage on his house for the amount that would be needed to pay for the work that has to be done. He has had some repairs done, some professionally and some by his son-in-law. He has replaced the worst affected window frames at a cost of over £400. He has redecorated the inside of the house, because the wallpaper came away at the corners and round the cornices. But still the damage is going on. Last Saturday I saw a new crack in Mr. Turner's home, beside the one that had been repaired. This new crack stretches up several feet from the ground, and Mr. Turner says that it is getting wider. Last year he tried to sell his house and was offered almost exactly £10,000 less than the price which could be obtained for a house in the same location but in a state of sound structural repair. Mr. Turner has already incurred over £400 on professional fees, yet nothing has been done to halt the steady destruction of his home. Many others are similarly affected. But the position may be more serious. As the water level goes down, the subsidence will take place further away from the motorway. Hundreds of houses may be affected. The Minister has recognised this because an official of his Department said at one meeting that the figures could run into millions of pounds. The cost of this is being borne by my constituents. The Department built this road and if, as Mr. Turner's advisers contend, it is the cause of his woes, the.. Department should pay up. The Department has a clear duty to meet its obligation and its liability. If it is not prepared to do that on the evidence so far available, it should at least be prepared to undertake the drilling of further bore-holes which would be necessary to prove once and for all whether my constituents are entitled to compensation."The evidence of the boreholes is not conclusive, because of the extended distance between them, and the variability of the moisture content of the clay. We do not believe that average moisture content comparisons are relevant unless more accurate data is obtained from bores adjacent to the original ones."
I congratulate the right hon. Member for Wanstead and Woodford (Mr. Jenkin) on his success in raising this matter and the vigour with which he has represented his constituents' interests. I have a file full of letters showing the action which he has taken on their behalf. In addition, I appreciate the anguish which this matter causes to those in his constituency who are affected by the scheme.After the completion of the road works which the right hon. Gentleman described, verbal and written complaints were made by local residents, about damage to houses, which they attributed in general terms to the construction of the new road. About 20 residents have made claims against the Department, and in one case where land slippage has occurred legal proceedings have recently been instituted. Apart from the case involving land slippage, which is under investigation by the Department, investigations to determine the cause of the damage have been made on a number of occasions by the firm of consulting engineers which designed and supervised the construction of the new road and also by a firm of independent consultants appointed by the Department specially for this purpose in 1976. Both firms of specialists have visited affected properties and have concluded that the road works are not responsible for the cracking and subsidence but that, in their view, the damage is the result of the natural drying out of the clay subsoil exacerbated by the dry spell which lasted from May 1975 to August 1976. That prolonged period of 16 months of less-than-average rainfall would naturally bring about a gradual decline in the water content of the soil. There is an important additional factor which is relevant to consideration of the problem which the right hon. Gentleman has brought to our attention—namely, that the subsoil in his constituency is largely composed of London clay, a material which is particularly badly affected by problems of alternate drying out and then further wetting. The general problems associated with London clay were brought out in a debate in this House in 1976, when it was pointed out that, whereas in the country as a whole as a result of the dry spell one in 5,000 houses was affected, in London the proportion was down to one house in 100 and in the South-East one house in 500. This flowed from the fact that London sits on clay. It is fair to say that Woodford is full of houses which have suffered cracks from subsidence caused by the problems of having been built on London clay. That is not only my opinion but is the view of the borough engineer. This is a general problem in the Woodford area. The right hon. Gentleman referred to the inspections and reports of the Building Design Partnership, which was called in by the Department as a body of independent consultants to examine the problem. We accept that there must be some independent examination of the problems —not simply examination by the consultants advising the right hon. Gentleman's constituents or the consultants involved in the original construction of the road. The Building Design Partnership reported that the general basis of complaint was that vibration from the road works had caused damage and that the road works by their presence had caused settlement, which in turn had caused damage. The partnership agreed that there was no doubt that settlements—some quite severe—had occurred, and probably were still occurring. In its report, the partnership said that the grounds for compaint could be separated into four—namely, vibration by itself, settlement by vibration, settlement due to ground slip and settlement due to ground shrinkage. In its report it ruled out the first three of those causes as having anything to do with the basic problem. The consultants drew attention to the effect of rain in the South of England in 1975–76, which created increasing reductions in groundwater levels and in shrinking clays. The latter problem is exacerbated by trees and shrubs, which draw their moisture from the clays and thus reduce their moisture content very considerably. Shrinkage of the stiff clays in the London area can be extensive and may, under grass alone, reach 1·5 metres in depth. For this reason, house foundations on clays—even for single-storey construction —are no longer permitted to be shallower than 1 metre without precautions being taken to obviate the effects of differential settlement. The houses inspected by the consultants had foundations of no more than 0·6 metres deep, and no such precautions. The consultants concluded that the cracking that they had seen was consistent with the type of settlements caused by the drying out of the clay subsoil under very shallow foundations. Also, the consultants' conclusion was that, taking account of the timing and nature of the road works, they did not consider that the road works had caused any damage in the dwellings examined. If I had had time, I should have liked to go into the various technical points which the right hon. Gentleman quite fairly raised between the various reports, Perhaps I may write to him about them. There is clearly a difference of opinion, but what we are relying upon is the independent consultants' report. I should add that it is not just one report. After all, as the right hon. Gentleman will agree, there have been six separate reports on six individual cases undertaken by the Building Design Partnership to look into this matter. In all those six cases, they have come to the same conclusions. Again, I shall not go into the details of the exact reasoning because I do not have enough time on this occasion. We can pursue that matter by letter, if the right hon. Gentleman will allow me to write to him. I come finally to the question of more boreholes. The right hon. Gentleman will remember that he wrote to the borough engineer to ask for his observations on the subsidence which is evident in the area. The borough engineer replied to the effect that within the borough defects had been reported over many years in all kinds of property founded on the band of shrinkable clay on which the borough largely rests. Whilst buildings close to the underpass have suffered serious defects, properties further away have been damaged to an extent which required underpinning. Private claimants have blamed the presence of council-owned trees. The borough engineer said that it might be possible to make further boreholes to determine what change, if any, there had been in the water content of the subsoil. but he entered the caveat that, even if this indicated a difference, it would not pinpoint the reason for the difference. The right hon. Gentleman then wrote to my right hon. Friend the Secretary of State asking him to consider the taking of further samples of subsoil. As my right hon. Friend has already told the right hon. Gentleman, on the advice of the two firms of consultants and taking account of what the borough engineer said in the caveat which he entered to his general opinion, he came to the conclusion that as the results were bound to be inconclusive there was little further point in making any further borings. None the less, having listened to what the right hon. Gentleman has said tonight —I wanted to do that before coming to any further judgment on this matter—I assure him that I shall study it with care when I have an opportunity of doing so. If I feel that on the arguments that he has advanced in this debate there is a case for taking further borings, I shall consider that most carefully and, again write to him with my final view on that. I should like to look again at the exact arguments that the right hon. Gentleman has advanced this evening, most of which I have heard before or read before in the file available to me, but which none the less—
The Question having been proposed after Ten o'clock and the debate having continued for half an hour Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at two minutes to Eleven o'clock.