Perhaps I may remind noble Lords that if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Clause 13 [Reference of matters to the Gas and Electricity Markets Authority]:
On Question, Whether Clause 13 shall stand part of the Bill?
After what I hope was a pleasant Christmas break for everyone and with wishes for a happy new year, including to the Minister and his team, we return to the question of what is the point of this Bill. It aims to abolish Energywatch, Postwatch and the National Consumer Council, and to create a new National Consumer Council which will subsume the duties of those bodies. In opposing the Motion that this clause shall stand part, we question the wisdom of abolishing Energywatch and ask the Government to make their case for doing so. In asking that, I want to make a number of points, particularly given that the energy market is going through a volatile phase at the moment.
Any consumer can tell you that they feel under considerable pressure to switch energy suppliers, which is a recognised way of saving money on fuel bills. However, very clever people out there who are not directly employed by the energy companies but hired at second-hand in what I might describe as a pyramid-selling scheme through firms in the pay of the energy companies, go around organising the switch of customers from one account to another. This rather febrile atmosphere has lead to a situation where in our view consumers need as much protection from a body like Energywatch as they can get. My central question to the Government is this: is the new body, one that may dilute the expertise of Energywatch and which will have split functions in terms of complaints and advocacy, really going to be a better solution as regards consumers?
I can understand that the DTI wants to streamline things and save money, and that is a perfectly admirable aim. However, if by doing so the Government save themselves a little money while the process costs consumers considerably more simply because they will not have such a good body representing their interests, I do not believe that that is to their benefit. We only have to look at the work of Energywatch on smart metering to realise that what it does can have considerable benefits for consumers. It would be a terrific step forward if the Government were to take Energywatch’s comments on smart metering firmly on board and progress the issue. Consumers would gain because they would be able to reduce their fuel bills by introducing better consumption patterns rather than just switching from one supplier to another. That contributes nothing in terms of tackling the issues around carbon emissions. Smart metering can provide a win-win situation in which consumers save money and the environment suffers from fewer carbon emissions. Energywatch has made a strong case for the Government to make a move on smart metering and, indeed, for Ofgem to take this on board.
My fear is that this kind of work, which benefits consumers and the climate-change agenda, will not fall into the remit of the NCC in the same way as it falls into that of Energywatch. It empowers consumers to do what they cannot do at the moment: that is, to sell the surplus energy they create through micro-generation back into the grid. Indeed, suppliers of energy could save on costs because they would have reduced contact and would not need people going around reading meters.
Finally, the biggest plus from the point of view of Energywatch is that the huge number of difficulties over billing would disappear because the smart meters would feed the information back directly to the energy companies. Many bills are estimated and incorrect bills cause great difficulties, but cases such as those to which we referred on the first day in Committee would disappear as a result of smart metering. If the Government continue down the path of abolishing Energywatch, which I believe they intend to do, perhaps a very good legacy of the work done by the staff of Energywatch to date would be for the Government to make a move to ensure that smart meters are brought in.
This is a rather pointless amendment but, none the less, it should be addressed. As far as I can see, we have an argument in favour of smart metering which is totally irrelevant to anyone who has had any dealings with Ofgem in the recent past. Meters were made to last and they will last for 40 years. It would cost an incredible amount of money to get rid of all of them. It would be possible but the carbon effect involved in the manufacturing of their replacement would greatly outweigh the savings to which the noble Baroness has alluded. She surely wants to read again and think about this part of her brief. It is a great idea but it would cost an awful lot of money. The cost would have to be borne by consumers who, frankly, balance up the advantages to the environment against the advantages to their own pockets.
While smart metering has, to an extent, been tried in Northern Ireland with the blessing of Energywatch and the regulators operating over there, I am not sure that that is the best argument for it if we are going to abolish our consumer protection body which I think most people will agree has been fairly effective. Consumers have confidence in it, the regulators get annoyed by it and the companies do not really like it. By and large those are three substantial ticks in the boxes. If the regulators feel at times uneasy because the consumer watchdog keeps spurring them on to do other things, that is a good argument for the watchdog. There should be an atmosphere of creative tension between the two. If the companies find it uncomfortable, the regulators are doing their job.
The test is whether this is only about saving money. If it is not, we have to give it a fair wind. I think that part of the problem we have with the energy industry in this country is that successive Governments—certainly the previous Conservative Administration when they privatised the energy industries—gave precious little thought to liberalisation and effective means of consumer protection. They did not think through anything other than the amount of money they were going to get through the privatisation sell off.
We are slowly but surely picking up the pieces. As we have seen, consumer protection can take a variety of forms but, in large measure, the reforms that took place in the early part of this century tidied things up a bit, but you still had regional committees with varying powers in different parts of the country.
Equally, we had a National Consumer Council that was certainly not a giant but which was sleeping a fair bit of that time. Those of us who have watched consumer affairs from down the Corridor were not greatly impressed by the record of the National Consumer Council. It was barely reactive and only rarely proactive as a body. In recent years, it has improved its game somewhat, but it still has an awful lot to do. If it is reinforced by people from Postwatch and Energywatch, who have shown themselves to be effective representatives and defenders of the consumer, we will begin to see something happen.
On energy matters and postal matters—I know that we will go on to look at postal matters in a moment, but I think that the two can be taken together—there has been effective consumer representation. There has not been that kind of effective consumer representation by the National Consumer Council. It has commissioned worthy studies; it has made general points; but it has not made many businesses fear its activities or made their flesh creep. Energywatch has certainly done that for a number of energy companies.
I am concerned that the momentum that has been gathering in the past few years as a result of Energywatch’s actions should not be stopped. Later this afternoon, we will be looking for assurances on specific matters, such as the speed with which consumer complaints should be addressed. Although the Minister gave us assurances on Second Reading, we need rather more substantial detail and flesh on the bones than that. The test of the Motion is: if the Government cannot give assurances, the clause may later be voted down. If it was, that would probably wreck the Bill, so it would become, instead of a probing amendment, a wrecking amendment.
The Minister has a case to make and I hope that he will be able to make it this afternoon. It is, at least in the first instance, that we have a new body of which the umbrella will be the National Consumer Council, that it will initially take in the functions of Energywatch and Postwatch and will ultimately include water as well. If it is that successful, it may persuade the Treasury that it can take in financial services later. That is for other legislation because it is not within the Bill, although I have to say that if it is a sufficiently good idea for energy, in my view, it is a good enough idea to include financial services in something independent of the Treasury—although you might say that in any Government few things are independent of the Treasury.
If there is an argument for the Bill, it is that it will continue the necessary shaking-up process of the National Consumer Council, but it will also bring energy matters into the mainstream of consumer issues. There are some specific problems—metering, people knocking on doors, switching and so on. Although in most other areas people switch between one service provider and another, in utilities, it is a wee bit different. But if we are to have an argument about switching and say that it should be a function of the National Consumer Council, why do we not include telecoms in the Bill as well? Telecoms are still a shared function between the DTI and the Department for Culture, Media and Sport. There is an awful lot of untoward activity against consumers in that area, but at the moment we have an organisation that, frankly, I believe to be far too close to Ofcom to be doing its job independently.
My only concern about the absorption of Energywatch and Postwatch into the National Consumer Council is that it becomes a wee bit too close to some other operations. That is what worries me because we must ensure that in their new form those consumer bodies continue to be able to act independently against companies when a challenge has to be made. They do not necessarily need to have a confrontational approach all the time, but, let us face it, energy companies in the United Kingdom are not bywords for philanthropy. They have to be challenged, harried and held to account. So far, Energywatch has not done badly in that regard, while the record of the National Consumer Council has been less than compelling in its ability to have a go at some of the big abusers of market power in Britain. Therefore, I am happy to give the Government a fair wind on the amendment, which I know is probing. Does the noble Baroness wish to intervene or ask a question?
I would love to ask a question. The noble Lord’s arguments are well thought out and he knows the subject fantastically well; but I am worried about the flexibility and correctness of what Energywatch has been doing. The noble Lord rightly said that it has been very good and in the previous Sitting of the Grand Committee we were given a good example of its flexibility. But if the National Consumer Council is a fairly moribund, inflexible and reactive, rather than proactive, organisation, how does the noble Lord think that the people who currently work in Energywatch or the new consumer council for water—with whom I am very impressed and are light on their feet—will feel about being subsumed into a moribund, reactive organisation? If I worked for Energywatch, I would not be happy about that at all and I might wish to pack my bags and go away. There is a chance that some of the best people in those organisations who have been running their own operation brilliantly would say, “Oh well, forget this—I am not going to join this organisation”.
I thought that I had qualified my criticisms of the National Consumer Council by saying that until fairly recently it was a bit of a sleeping dwarf. Excuse my sizeist language, but, at best, it under-punched its weight considerably and was not very effective. Of late, it has been far more effective and far more proactive. The injection of individuals from Postwatch and Energywatch could well carry on that process and add a dynamic to it. The idea that we should segment the consumer protection industry, as it were, is dangerous, because there are degrees of overlap in a number of areas and the degrees of expertise are common to many utility advocacy roles. It is possible to create a seamless organisation.
For the moment, segmentation will continue in other areas, but there is a case to be made for further energising—perhaps I should use a better word—further injecting some urgency into the activities of the National Consumer Council, which has come a long way in a comparatively short time, along with Postwatch and Energywatch. Postwatch is a relatively new body, as is Energywatch. A number of people will leave, but there is always a turnover in such organisations and I imagine that a number of people will be interested to see what the new body is like and will hang on for a bit longer. Others will have been looking for a chance to leave and are taking it now. When you bring together public bodies, there will always be a degree of shake-out. All I can say is that while I do not expect us to have a vote on this amendment—we do not behave like that in these Committees—it should be rejected and the Government should be supported on this issue, with the qualifications that I have expressed.
I remind your Lordships that this is not an amendment. The Question is that Clause 13 stand part of the Bill. As many as are of that opinion will say, “Content”. The Minister is going to reply—I thought that he sat down and did not want to.
It is not normally the practice for us to have votes in Grand Committee, but I am new so I do not want to comment. I join the noble Baroness, Lady Miller, in wishing noble Lords a happy new year. Everyone is looking much chipper and keen to get on with the Bill, so I shall proceed.
I thank the noble Baroness for raising issues such as smart metering and itemised billing in energy, because this is one of the areas that the Government are looking at as part of the energy review process, and we will be looking in detail at those measures. This is the second day of Grand Committee. My officials and I have looked very carefully at the report of the first day in Hansard, and we are doing our best to meet many of the concerns that were expressed on that day. We do listen very carefully to what noble Lords have to say during proceedings.
One or two specific issues were raised initially on Energywatch. We intend the sectoral expertise of Energywatch to be guaranteed as part of the new NCC. There is no intention at all to diminish the role of a body that represents consumers of energy. The new NCC will continue to carry out the sectoral functions currently undertaken by sectoral consumer bodies such as Energywatch. As I said, there is no intention of diminishing the role that Energywatch currently plays when it adopts its new form and is subsumed into the NCC. I also reassure my noble friend Lord O’Neill of Clackmannan that there is no intention of presenting this as a money-saving measure. That is not the intention; the intention is to have a more coherent advocate for consumers across a range of areas.
My noble friend also mentioned telecoms. The telecoms industry currently has a consumer panel, and when the Government looked into which sectors representing consumers should be incorporated into the NCC, they saw that telecoms had an independent regulator with powers and duties to protect consumers and teeth to sort out suppliers, an independent consumer panel to advise on specific issues, and an industry-funded independent ombudsman. In that sense, it already has a very good structure, so it is not felt appropriate at this stage to incorporate it into the NCC.
On the general issue of Clause 13, I am grateful to the noble Baroness, Lady Miller, and the noble Lord, Lord Razzall, for tabling the Question and thus for the opportunity to debate this important clause today. I am pleased to have had the benefit of the insights of noble Lords who have already contributed to the debate. In speaking to the clause, I draw attention to the importance that I attach to preserving the very best elements of the current arrangements, especially where they provide important powers that can be used to the benefit of consumers. In markets with a sectoral regulator, that regulator has great responsibilities to ensure the proper operation of the market and to ensure that licence holders conduct themselves appropriately in line with their obligations under the licences, codes and agreements. This is in the interests of consumers. Indeed, the primary statutory objective of the Gas and Electricity Markets Authority in carrying out its functions is to protect the interests of consumers. This is what the clause refers to. To back up its statutory objectives, the authority has enforcement powers that enable it to secure compliance with the important obligations placed on licensees in the energy sector.
We need to preserve the ability of the authority to bring to bear its powers in support of the consumer interest, and in aid of that enforcement role, by making provision in the Bill for the council to alert the authority of issues within its regulatory remit wherever appropriate and necessary. That is what the clause currently delivers for consumers; it focuses on resolving problems in the most effective way. Where the regulator has enforcement powers in respect of the complaints made by the consumer, it is sensible to ensure that the regulator is aware of that complaint and has the opportunity to use such powers to resolve it.
That position is not different from the current one, and we are keen to maintain proper and effective means to address consumer detriment. Consequently, Clause 13 makes provision for the new council to refer a complaint made under Clause 10(1)(a), or one to which Clauses 11(3) or 12(1) apply, to the Gas and Electricity Markets Authority, where the new NCC considers that the authority’s regulatory functions may be exercisable unless the authority is already aware of the matter. Where a complaint is made under Clause 12(2) in respect of gas or electricity disconnection and is referred by the council to the authority, the council is not obliged to investigate the complaint until the authority has had a reasonable chance to exercise its enforcement functions.
The clause provides for the council to notify a complainant if the council considers that a complaint referred to it relates to a matter that can be referred to the authority under existing legislative provision. This ensures that the complainant is informed of the most appropriate route for effective resolution of the problem. The clause, as it stands, is currently a good one, and will ensure that consumers are adequately protected.
I realise we are not debating an amendment, so I am not making a reply. I simply wanted to make a point at this moment. I am grateful to the noble Lord, Lord O’Neill, for his contribution. He said this was a pointless amendment, but without it we would not have seen the expertise he subsequently displayed to us. The Minister’s comments, that he and his officials are considering the points we made on day one of Committee, are helpful. For us, given the comments during the debate on this clause, the most effective way of ensuring that the new body has teeth remains to convert those contentious “mays” to “must” or “shall”. That issue remains at the heart of some of our concerns about Energywatch and the other bodies that we shall debate shortly.
Clause 13 agreed to.
Clause 14 [Reference of matters to the Postal Services Commission]:
On Question, Whether Clause 14 shall stand part of the Bill?
Here we move to Postwatch. Many of the arguments are similar to those regarding Energywatch, so I will not rehearse the generality of those. I will just say that the need for sectoral expertise is just the same, and we are worried about expertise being lost in the move. As the noble Baroness, Lady O’Cathain, said, are those staff with particular expertise, drive and enthusiasm going to make the change?
The postal sector is in as much of a state of flux as the energy sector; perhaps even more so, in the sense that some of what is happening is so much within the Government’s remit, as they decide through whom services should be available. My noble friend Lady Thomas of Winchester will speak about post offices in rural areas, so I will not dwell on that issue. I shall simply say that, coming from a rural area, I am reminded weekly—I am not there every day—how much people in such areas rely on those services.
The postal sector is experiencing new operators and service providers coming into the market. Royal Mail is assessing many of its products and services and the changes have seen the introduction of pricing in proportion, for example, and the greater use of automation systems. Such changes mean that consumers need to understand what is happening. With the changes in post office closure times and so forth, they need a strong body to ensure that the information on their effect on consumers is gathered effectively and is then used to inform policy changes.
It is also important to remember that the postal sector deals not only with domestic consumers; there are also business consumers. They too have strong concerns and it would be useful if the Minister could comment on the way in which the new body will relate to the regional agenda. As yet, we have talked mostly in national terms but the pressures in metropolitan and rural areas are different. In the south-west, compared with the south-east, regional bodies will collect different, critical information. I hope that the clause-stand-part debate will enable other Members of the Committee to say how they feel on this issue, and in particular enable the Government to make clear their stand on it.
I want to speak to the Question whether Clause 15 shall stand part of the Bill. It deals with investigations relating to public post offices. Postwatch has provided an invaluable analysis of the problem the post office network faces not just in rural areas but in many urban deprived areas too, and it has made some important suggestions. It wants investment, tied to reform, in rural post offices to be extended beyond the current cut-off date of April 2008 and for that investment to include urban deprived branches.
Postwatch makes a strong plea for all structural changes to be driven by customers’ needs and undertaken following local consultations with affected communities. It is keen on innovative schemes to enable post office services to be delivered more cost effectively, and it also believes that the Government should make more of their services available at post offices. After all, there is strong evidence that people trust post offices. Nearly 75 per cent of the population would rather deal with the Government via a post office branch than directly. Postwatch’s independent, clear view is extremely welcome and timely and it would be a retrograde step in consumer power if it were to be submerged in a less effective body as regards postal services.
Postwatch has also reviewed the latest rural pilot schemes which focus on the impact on customers, and has made recommendations for improvements. It was, for example, concerned about customers having to wait for a mobile post office van to arrive in the depths of winter in one northerly rural location, and it found that all mobile vans had experienced technical difficulties at some time or other. One problem it highlighted was that faced by disabled customers when a ramp has to be operated by a lone van driver, which is quite a lengthy and time-consuming operation.
Postwatch’s comments are clear and practical and we are not confident that its expertise will be continued if it loses its identity within a new National Consumer Council. What reassurance can the Minister give that this independent view will continue and that consumers, particularly the elderly and disabled, will continue to benefit from this detailed care in looking at all aspects of the consumers’ experience with the postal service?
I declare an interest as chair of the current National Consumer Council. I wish to address the remarks of the noble Baroness in relation to the Question that Clause 15 shall stand part of the Bill, because the inclusion of the clause imposes on the new body the obligation which currently rests with Postwatch to consider post office closures and the plans for changing the post office network. The noble Baroness suggests that this issue will be lost in the new organisation. But the benefit of it being looked at in a wider organisation is that the rural consumers and the deprived urban areas which are losing their post offices suffer from the multiple withdrawal of services, not simply those of the Post Office. The post office has been key in many respects, but they are also losing their local shops, their garages and, in some cases, their pubs. Consumers and many public services are withdrawing to the larger towns.
For all those reasons, post office closures are part of a bigger consumer issue. The expertise of wider consumer areas can be brought to bear, as the noble Baroness said, on creative, innovative solutions in providing those services within rural areas. I therefore suggest to her that putting this matter into a bigger organisation will make it more likely that the concerns of consumers in rural areas will be met. Provided we maintain the expertise of Postwatch within the new organisation rather than confining it to looking at the future of the “post office”—the local post office branch—this may well be part of a bigger and better solution for many rural consumers.
I would very much regret the removal of Clauses 14 and 15 from the Bill because I do not think that would serve the interests of the rural consumers that these amendments purport to represent.
Following on from my noble friend I should like to make a further point. There is a view that post offices, particularly rural post offices, are somehow the acme of small retailing. We know that they exist and offer a service but this is very rarely at any inconvenience to the owners of the shops. In some parts of the country, if you go on a Tuesday afternoon you will find that they are closed because they work a half-day on a Tuesday. When my wife was collecting the child benefit for our boys on a Saturday because she worked all week, if she was not there by 12.15 she found that the shutters were closed and there was no money available. She did not need to obtain it exclusively from the post offices but a lot of working mum’s do.
There is a new style of retailing—not necessarily 24-hours-a-day-opening—but some of these post offices have got away with retailing murder because of the sentimental affection that a number of their customers had for them. People were kept out of them because it did not suit the purposes of the postmasters and postmistresses to keep their shops open
Sometimes, where they have mini-supermarkets and the kinds of things to which my noble friend referred—and all power to their elbow—they still shut the post office at 12 o’ clock on a Saturday although they keep the rest of the operation going. In my previous constituency, I talked to people who had very successful mini-supermarkets with post offices in them; it was the only way of keeping the post office going. I asked, “Why don’t you open after 12 o’clock or keep the place open after six? This is a small commuting town and people require postal services after their work or after they have done other things at home”. They said, “We never thought about it”. The fact that they had never thought about it was in large measure because the Post Office Counters organisation never really put any pressure on the shopkeepers.
Some closures, not all, are due to property prices. People made more out of selling their shop to someone as a home in a very attractive rural village than they would have made out of running a business, regardless of how much government money was put through in transaction charges and so on. There are many reasons why post office services have contracted in rural areas, but one of them, to which we have given insufficient attention, has been the quality of the service provided for all but those who get out of bed and walk in at 9.30 in the morning. These people are in the minority. Many people would make use of the services if they were open into the evening, as many of the rural shops are at the moment. That is part of a greater concern that the National Consumer Council brings post office services into a proper way of operating.
At the end of the day, post office services are a franchise operation, and the franchisor has given insufficient attention to the retail service needs of the broad spectrum of the community. There is a case to be made for the NCC to shake up the post office services once it looks into the matter. If there is a criticism to be made of Postwatch, it is that it has been too narrowly focused, even though Peter Carr, its previous chairman, was a very distinguished retailer and had a very business-minded approach to the whole area.
Insufficient consideration was given to putting post office services in the context of small-scale community retailing across the board of the kind that is surviving in very difficult circumstances in several areas because outlets are open when people want them to be open and provide the services that people need, not necessarily 24/7 but rather longer than from 9 to 5 and perhaps only from 9 to 12 on a Tuesday and a Saturday, as several post offices quite often are. If you stay open for longer, by and large you do more business. That is one rule of retailing that seems to have escaped the attention of several people in the post office lobby.
I am grateful to the noble Baroness, Lady Miller, for raising the important issues to which these clauses give rise and for the opportunity to reflect on them. The noble Baroness, Lady Thomas of Winchester, mentioned the post office network. First, the Government are putting £1.7 billion into supporting the post office network. There is, of course, always a question of how much support the Government should give, but that is a considerable amount of money, and no post offices will close without local consultation. So there is that commitment.
There is no reason why the NCC, which incorporates the functions of Postwatch, should be any less effective. In fact, as my noble friend Lord Whitty said, the Government’s view is that it should be more effective, because here you have one large consumer voice for consumers across a whole range of services. My noble friend made the point about the range of services that people expect from their post office these days. They provide not only postal services but a whole range of other services. My noble friend Lord O’Neill made similar points. I will return to the question of regional networks as I go through the clauses.
Clauses 14 and 15 provide for continuity specifically by preserving key elements of the current arrangements. They confer important powers and duties on the new council to act in the interests of consumers. I should make the point that Clause 5 makes specific provision for the new council to have regard to vulnerable groups, including the elderly and the disabled. Clause 14 enables the new council to bring the full weight of the regulator, the Postal Services Commission, to bear on instances where, for example, the council is concerned that a licence condition has been breached. That is clearly important to correct what might otherwise turn into a long-running delinquent practice by a licence holder that could have adverse consequences for many consumers. At the same time, it is prudent to provide for the council to agree with the Postal Services Commission a description of issues that should be referred by the council to the regulator. That enables the commission to be made aware of those issues that would properly concern it and enables the council to play an important and appropriate role in that process, ultimately to the direct benefit of consumers.
I hope that the Committee will agree that it is desirable there should be provision in the Bill for these matters to be brought to the attention of the commission, and that it is in the interests of the commission and the council to agree from time to time on the scope of matters to be referred under this clause.
I turn to Clause 15, which makes specific provision for the new council to have a role in investigating the number and location of public post offices throughout the United Kingdom. Clearly, that is currently a key role for Postwatch, and the Committee will be aware of the importance of the role going forward as we consider the restructuring of the post office network, to which I have already referred. That will not change. There will still be a role of oversight to the changes to the post office network.
Under the Government’s proposed strategy for the network, which is currently out to public consultation, restructuring of the post office network will be undertaken on a more strategic and structured basis than previously, within the framework of access criteria to safeguard reasonable access to services in rural and deprived urban areas. It is not just rural areas that badly need postal services and post offices but also deprived urban areas. We should not forget that.
The closure element of the programme will be limited to a maximum of 2,500 offices, as has already been announced. It will include both the urban and rural networks, with rural closures being mitigated at least in part by the outreach programme—about 500 offices or facilities being offered.
Postwatch, in its current form, will have a significant role to play in developing proposals for closures and outreach in each area. The restructuring and closure programme will be completed by late 2008, and should therefore be completed—or very largely so—before Postwatch merges with the new council.
Returning to the point made by the noble Baroness, Lady Thomas, I mention regional committees. I know that Postwatch values highly the work of its regional committees, as do the Government. That is why the Bill makes specific provision in Schedule 1 for the council to establish regional committees. There is no set number of committees which may be established under that provision: if we thought of a number today, it would inevitably be arbitrary, and a greater or smaller number of regional committees may be needed over time. Regional committees established by the council would be able to cover all consumer issues, not just postal services or energy as we have now.
I wanted only to emphasise that there is no prejudice against regional committees, and that the Bill makes a sensible and flexible provision to enable the council to fulfil any regional remit in an appropriate way to the benefit of consumers.
Clause 14 agreed to.
Clause 15 agreed to.
Clause 16 [Reports by the Council]:
[Amendments Nos. 67 and 68 not moved.]
Clause 16 agreed to.
Clause 17 [Secretary of State's power to require reports]:
[Amendment No. 69 not moved.]
70: Clause 17, page 10, line 15, leave out “may” and insert “must”
The noble Lord said: I shall speak also to Amendments Nos. 75 and 76 and join the Minister and the noble Baroness, Lady Miller of Chilthorne Domer, in offering our very best wishes for 2007 from these Benches.
This group of amendments is intended to probe the role of the Secretary of State in relation to the new NCC. Amendment No. 70 would place an obligation on the Secretary of State to publish any report submitted to him by the council. That is a matter of transparency. Where the NCC is providing reports on various matters, it is appropriate that those reports be made available to the consumer. In fact, I cannot think of a reason why that should not happen, unless there is to be some specific relationship between the NCC and the Secretary of State of which we are unaware that precludes giving information to the public. I should be interested to hear the Minister's reaction to that.
Amendment No. 75 takes the issue further by proposing to ensure that where the Secretary of State makes appointments to the NCC under the provisions in Clause 19(2)(d) in relation to co-operation arrangements, he will have a duty to consult those interest groups that will be affected by the appointment.
Amendment No. 76 would reinforce Amendment No. 75 by ensuring that where a co-operation arrangement is made, the NCC would provide a memorandum of that appointment no later than six months following the arrangement.
This package of amendments is important, and especially so in the context of the Government’s record on the independence, or, rather, lack of it, of non-departmental public bodies. I am sure that Members of the Committee will recall the reports in the media within the past few weeks regarding the make-up of the Big Lottery Fund and the Commission for Equality and Human Rights. Those reports have exposed a worrying precedent, whereby supposedly independent bodies are open to manipulation by government appointments and directions.
The NCC is a body about consumers and for consumers. We on these Benches appreciate why the Government would want to bring its achievements closer to the process of government policy making. It is testament to what I might call the “old” NCC’s achievements that the Government wish to capitalise on its expertise. These amendments across the board seek to preserve that expertise and the independence that has reinforced it over the past 30 years. I beg to move.
I would like to speak to this amendment which also stands in my name. I am at a wee bit of a loss to know why this subsection is in the Bill because you would imagine that if you request information, you then have the chance to publish it. So why do we need to have Parliament’s permission in the form of granting the Government the right to publish if they so wish? It seems a rather unnecessary amendment. If the subsection is intended not to give the council the power to publish but, because of the existence of the word “may”, to give it the power to refuse to publish, we are talking about something else; we are talking about giving the Government the power to waste the National Consumer Council’s time in getting it to produce a report which one would imagine would be of interest to more than Ministers and the Secretary of State. It is one of those pieces of meaningless verbiage which find their way into Bills because they have always done so. Therefore, I would have thought you either have the provision “must”, or you do not have the subsection at all.
If the National Consumer Council has some plus points—and I think that it has—one of the areas where it has been very influential is in producing well thought-out and well considered reports, which have on occasions moved forward discussions and government thinking. But if the reports are that worthy and that important, as I think probably they would be, it is not unreasonable that the rest of us should have access to them and that they should be published by the Minister.
In some respects the Bill would be none the worse if subsection (2) was not present. But it is and in the form that it is written it is unhelpful. It could be a form of embarrassment to the Government and it would be better if they had “must”. If they do not want “must”, at another time and in another place it would be simpler just to withdraw the subsection.
I realise that we are not pushing the amendment to a vote, and I am merely trying to be helpful to my noble friend because I think that this is the kind of issue that is just storing up trouble for the future. The nasty people along the other end of the building would have great sport with a piece of sloppy legislative drafting of this nature, and the Bill would be none the worse without it. But if we are going to have it, it ought to be “must” rather than “may”. There is a danger that a cynical Secretary of State in another administration might well take the opportunity that this subsection affords to involve the National Consumer Council in needless work to which we, the public and politicians, would never have access, because there would be no obligation on the Government to publish it.
I, like my colleague and noble friend Lord O’Neill, find it curious that subsection (2) should be here at all. It states only that the Secretary of State “may” publish; surely there is no need to require the Government to publish a report for which they have specifically asked—but I do not see much point in the amendment, either. As my noble friend indicated, the National Consumer Council has over the years published numerous reports, and he, who has been critical of that organisation in the past, none the less admits that many of those reports were of value. My point is simply that there is hardly a need to insert “must” instead of “may”, because the National Consumer Council could publish the reports as it wishes and that has been common practice. I know that this may sound unhelpful: I see neither the point of the Government’s subsection, nor any point in the amendment.
Perhaps I may ask the noble Lord, Lord Borrie, a question. Is that permitted in Grand Committee? How would he feel if there was a deliberate attempt at obfuscation by the National Consumer Council under new management, not under existing management—pace the noble Lord, Lord Whitty?
We are envisaging a situation where the National Consumer Council, having been asked by the Government to produce a report, does not wish it to be published. It is a rather incredible notion that someone who has worked on a report would wish to keep it secret. That hardly needs to be considered. I suppose that the remote possibility being imagined by the noble Baroness could have happened at any time in the past, whereby the NCC started work on a subject and then perhaps realised that it would cause such an unfortunate impression of the NCC that it did not want to publish a report. That is difficult to imagine, but if that were the case, it could have happened in the past and it could happen in the future.
I must pursue this for a further moment. There have been examples, not in relation to the National Consumer Council, where advice has been given to Government and demands have been made for that to be published. Not everything has been done in the interests of complete openness. I feel that that could well happen and if a report is made to Government there really should be an onus for it to be published.
These amendments relate to the council’s functions outlined in Clauses 17 and 19 and to the actions that fall to the Secretary of State and the council in that respect. Following the points made by my noble friends Lord O’Neill and Lord Borrie, the Government agree that it could have been left unsaid and that we did not need to publish these reports, but we considered that it would be more transparent to show that reports under Clauses 16 and 17 may be published, although there is not a duty to publish, either. That was the Government’s view.
Clause 17 gives the Secretary of State the power to require the council to prepare and submit reports on any matter. This is seen as complementary to the council’s other functions; in particular, the requirement for it to prepare, publish and consult on a draft forward work programme for each financial year and to consider any representations made in response to that consultation. We envisage that this process would ensure that the council captures all known issues of key importance to consumers. However—and this is a central point—from time to time other consumer issues may arise that are judged important enough to the consumer interest to warrant further attention. In those circumstances the Secretary of State would be able to call on the expertise of the council to prepare and submit a report. That is the basic thinking behind these clauses. Such a report could then be used to assist all concerned with making an informed decision regarding what further action, if any, is needed on the issue.
The effect of Amendment No. 70 would be to place a duty on the Secretary of State to publish all reports submitted by the council under this clause irrespective of whether they are of wider interest or relevance. In practice, the Secretary of State will work closely with the council and others in coming to decisions about what would be appropriate in each circumstance. The current drafting allows for the discretion needed to consider when publication is necessary or desirable. Unnecessary publication costs which might otherwise have been avoided could be incurred, which addresses the point raised by the noble Baroness, Lady O’Cathain. If the word “shall” is used, there would be an obligation to publish which might not be appropriate in all circumstances and certainly could be very costly. In the light of my explanation, I hope that noble Lords will understand why the Government do not feel inclined to support the amendment.
Amendments Nos. 75 and 76 relate to Clause 19 which requires the council and the designated bodies referred to in this clause to enter into co-operation arrangements and includes provisions relating to such arrangements. These co-operation arrangements are intended to encourage effective communication channels and collaborative working, and to provide an effective interface between the council and others where functions and responsibilities coincide or overlap. Over time it may be necessary to consider whether to widen the co-operation agreements to include other bodies. In such circumstances, the Secretary of State may designate other persons to be subject to these provisions. Amendment No. 75 would in effect require the Secretary of State to consult on a decision to require the council to enter into co-operation arrangements with new designated persons. After careful consideration of the amendment, I am not convinced that such a formal duty is necessary. In practice, the Secretary of State will work closely with the council and others prior to making an order adding a person to the list of designated bodies for the purposes of this clause. The imposition of a formal duty to consult could cause delays and such an intention would in any event most likely be included in the council’s forward work programme.
Amendment No. 76 addresses Clause 19(4) which requires the council and a designated body to prepare a memorandum setting out the co-operation arrangements as soon as practicable after agreement is reached on these arrangements. The amendment restricts this to a period of no more than six months after agreement is reached. After careful consideration, we are not aware of any reasons why in practice the council and the designated bodies would not prepare the memorandum of agreement as soon as practicable, and there may be instances where there are good reasons why that could not be achieved within a six-month period. The imposition of a time limit could therefore result in a breach being incurred, but one that had been incurred for a good reason.
I thank the Minister for his response to a debate which has from time to time seemed rather unusual. I observe that he referred to the expense of publishing all the reports. However, I would not have thought that simply posting a report on a website would be hugely expensive. I thank also the noble Lord, Lord O’Neill of Clackmannan, for the welcome association of his name to Amendment No. 70 as well as his helpful words. I have listened with interest to the remarks of the noble Lord, Lord Borrie, and my noble friend Lady O’Cathain, and I am sure that we will all read Hansard and consider our various positions for the Report stage. However, for now I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 71 not moved.]
Clause 17 agreed to.
Clause 18 [Advice, information and guidance]:
[Amendments Nos. 72 and 73 not moved.]
Clause 18 agreed to.
Clause 19 [Duty to enter into co-operation arrangements]:
[Amendment Nos. 74 to 76 not moved.]
Clause 19 agreed to.
Clause 20 [Power to co-operate and give assistance]:
[Amendment No. 77 not moved.]
Clause 20 agreed to.
Clause 21 [Voluntary activities]:
[Amendments Nos. 78 to 85 not moved.]
Clause 21 agreed to.
Clause 22 [Supplementary powers etc]:
[Amendment No. 86 not moved.]
Clause 22 agreed to.
Clause 23 [Provision of information to the Council]:
[Amendments Nos. 87 to 91 not moved.]
On Question, Whether Clause 23 shall stand part of the Bill?
In rising to oppose the Question that Clause 23 shall stand part of the Bill I shall speak also to Clause 27. These amendments are intended to elicit the precise functions of Clauses 23 and 27. Clause 23 enables the National Consumer Council to order any service provider, the Office of Fair Trading, a designated regulator or any other person specified by the Secretary of State to provide information as would be specified in a notice given under subsection (1). The clause is reinforced by Clause 25 which enables the NCC to apply for an order through the courts to enforce the giving of information and paying of costs incurred during the process should any of the parties fail to provide the information required by a notice under Clause 23. Clause 27 enables the Secretary of State to issue regulations which exempt parties from providing information.
While Members on these Benches believe that the NCC should have the power to extract information from relevant groups in the carrying out of its functions, it seems that the combined effect of Clauses 23 and 27 represents a case of using a rather clumsy sledgehammer to crack a nut, especially in respect of smaller businesses that provide services. I am concerned too that Clause 27, which provides exemptions from giving information to the NCC, could frustrate the effectiveness of the council. Once regulations are made preventing the giving of information, they will be very difficult to reverse, and it concerns me that circumstances could arise where, while it is important to have access to information, that access could be curtailed by the Secretary of State’s regulations. Indeed, the principle of Clause 27 seems to go against the principle of Clause 23.
I would be grateful to the Minister if he could inform Members of the Committee of the types of information he expects the Secretary of State to withhold from the NCC and whether regulations will contain caveats where extenuating circumstances would justify the giving of that information. I was pleased to see that Clause 23 includes a caveat that encourages minimising costs, yet there is no corresponding caveat in Clause 25. Clause 23(5) states that the NCC must,
“have regard to the desirability of minimising costs, or any other detriment, to the person to whom the notice is to be given”.
But where an order is made under Clause 25 to force a company or person to provide information who has not already done so, subsection (4) of the clause states that an order could force the defaulter to pay all the costs or expenses of the process.
Could there be a case where the National Consumer Council requires information from a person and fails to have actual regard to the need to minimise costs, and the person is simply unable to provide the information due to the cost? The provisions under Clause 25 could then result in an unfair financial burden on the so-called defaulter. The answer may be to come back with an amendment on Report to tighten the duty of the NCC to ensure that costs are not extortionate. I would be grateful if the Minister explained what penalties the NCC would suffer if costs incurred by Clause 23 were extortionate, and what thresholds he envisages would constitute unreasonable costs imposed on a regulator, an individual service provider or the OFT.
Clause 23 gives the council the power to request information from the Office of Fair Trading, a designated regulator, any person who supplies goods or services in the course of business and any description of persons specified by the Secretary of State by order. The council may not request information that it does not require to undertake its functions. These powers are essentially the same as those currently available to Energywatch and Postwatch, and accordingly are necessary for the functioning of the new council.
If the council requests information from the OFT, or a designated regulator, which then fails to provide the information requested, the council may require the OFT or the designated regulator to provide a notice setting out the reasons for that failure. The council may publish that notice. This also replicates the current arrangements between Energywatch and Postwatch and respective sectoral regulators.
We anticipate that in practice the new council is likely to rely on the quality of existing relationships built up by Energywatch, Postwatch and the existing National Consumer Council with their stakeholders, and on high quality and responsible consumer advocacy to obtain information, rather than have to resort to formal procedures. In many cases, the existence of the powers will be enough to encourage provision of information. However, examples where the new council may need to fall back on these powers might include situations where a supplier appears to be withholding relatively uncontroversial information, or comparative data on services or information to inform research by the new council, even though such information would not generally be publicly disclosed.
There are also safeguards to the exercise of this power. The council cannot request information that is unrelated to its functions. Further, the council must consider the impact that the request for information will have on the person to whom the request is made, and be mindful of the desirability of minimising the cost or any other detriment that the request might cause. That partly answers the point made by the noble Baroness, Lady Wilcox. With regard to the exemptions, the sort of information that may come under the overall umbrella would be issues like national security or commercially sensitive information.
Information cannot be required that a person could not be compelled to provide in legal proceedings, such as information subject to legal professional privilege. Clause 28 provides that the protections in Part 9 of the Enterprise Act 2002 on disclosure of information will also apply.
Clause 27 provides for the Secretary of State to make regulations specifying exemptions from the requirement to provide information to or by the council in relation to persons to whom the notice may not be given—information which a person may refuse to supply, for example, or circumstances in which a person may refuse to comply with such a notice on the grounds of national security or commercial confidentiality, as I have just mentioned. That balances the power to request information and replicates existing powers in the energy and postal services sectors.
I thank the noble Baroness, Lady Wilcox, for giving us the opportunity to discuss this important issue. For the reasons I have given, however, I am not convinced that these amendments represent the best way forward in terms of the new council’s ability to carry out its functions effectively and efficiently to represent the interests of consumers.
Clause 23 agreed to.
Clause 24 agreed to.
Schedule 2 agreed to.
Clause 25 [Enforcement by court of section 23 notice]:
[Amendments Nos. 92 and 93 not moved.]
Clause 25 agreed to.
Clause 26 [Provision of information by the Council]:
[Amendment No. 94 not moved.]
Clause 26 agreed to.
Clause 27 [Exemptions from requirements to provide information]:
[Amendment No. 95 not moved.]
Clause 27 agreed to.
Clause 28 [Disclosure of information]:
[Amendments Nos. 96 to 99 not moved.]
Clause 28 agreed to.
Clause 29 [Abolition of “Energywatch” and “Postwatch”]:
100: Clause 29, page 16, line 43, leave out subsection (2)
The noble Lord said: Amendment No. 100 would prevent the abolishment of Postwatch and is intended as a probing amendment. I note that the noble Baroness, Lady Miller of Chilthorne Domer, has tabled a Motion to oppose Clause 29 standing part of the Bill. While I look forward to hearing what she has to say, I reserve judgment until I hear the Minister’s response on the wisdom of merging Postwatch with the new NCC. The question of Energywatch will be addressed in our amendments to Clauses 42, 48 and 49, Energywatch and Postwatch being two different organisations.
We are concerned on several counts about the merger of Postwatch into the NCC. It is vital that consumer voice does not result in a dilution of the sector-specific expertise essential in postal services. This is particularly important for the postal services market, which has only recently been opened up to competition. The role of Postwatch has been vital in ensuring that the interests of all consumers of mail services are upheld in this uncertain and changing marketplace. It is essential that consumer voice continues to represent businesses in the same way as Postwatch has done. The fundamental changes taking place within Royal Mail and within the market overall are affecting and will continue to affect all businesses, no matter what their size. It is therefore imperative that there is an effective voice for businesses dependent on mail services.
We should not forget that an effective consumer voice is also an essential sounding board for the sector regulator. I am sure that Members of the Committee will have taken great interest in the Statement repeated by the Minister in your Lordships' House before Christmas. In our response to it, we welcomed the Government’s U-turn on post office card accounts, but unfortunately that is all we have to welcome in the Government’s policy on post offices. There was no real answer on the anticipated effects on rural post offices, or inner city ones. The Minister guaranteed that 95 per cent of the rural population would be within one mile of a post office but did not identify whether that would be a post office in the traditional sense of one open every day of the week or whether that figure would include the new outreach programmes. I should be grateful if he could expand on that point.
This matter is close to our hearts. My noble friend Lady Byford made a valuable contribution to the debate on the Statement, and I had hoped that she would be able to make a contribution this afternoon. In the light of the fundamental changes being made to postal services and the vast reductions being made in the number of post offices, which will affect not only small local businesses but also the most vulnerable consumers, I should be grateful if the Minister could present his own forward work plan for consumer services under the new Postwatch arm of the NCC and say whether it will do as much as Postwatch has done—or, indeed, more for consumers using postal services. I beg to move.
I have a feeling that we have been around the houses on this one either with regard to energy or to postal services. I thought that my noble friend Lord Whitty made the key point earlier: as long as the specific expertise in the particular segmented consumer bodies is not lost, there are advantages in the bodies coming together within the umbrella of the National Consumer Council because the NCC has a larger role for consumers generally. It can bring to the table a power of knowledge and advocacy which is broader than the other bodies.
There probably would not have been separate consumer bodies in those different fields if it there had not been different legislation at different stages of parliamentary life that required such consumer advocacy bodies to be created. There was the same position with regulators. We had separate regulators for gas, electricity and the other privatised industries because the legislation did not come forward at one moment but at different points of time. Now, later, one can look back and see whether a bringing together of either the regulatory bodies, or, in this case, the consumer bodies, is desirable. I think that the Government have made a very good case for saying that that is desirable in the particular instances proposed in the Bill. We have discussed the matter of merger several times. The noble Lord, Lord De Mauley, made the case earlier, but I think that it has been answered.
I shall not repeat the comments I made in speaking to whether the clause stand part but merely say that those concerns are there. I ask the Minister to elucidate further on the position for business customers under the new arrangements. Postwatch has been particularly active recently on one issue that has concerned a lot of small and medium-sized enterprises. That of course is the new PIP introduction—pricing in proportion to the size of your mail—which has affected a lot of enterprises. What assurances can the Minister give to business customers about their essential postal services? In this great day of the internet, people think that so much business is done by e-mail, as indeed it is, but an awful lot of businesses still rely very heavily on postal services for one reason or another.
On Amendment No. 100, in the name of the noble Baronesses, Lady Wilcox and Lady Byford, and the noble Lord, Lord De Mauley. I am most grateful to them for giving us the chance to debate one of the most fundamental objectives of the Bill—the creation of a stronger cross-sectoral consumer advocacy body to address consumer issues that frequently arise across sectors of the economy.
On the point made by the noble Baroness, Lady Miller, about business customers, there is no reason why they should receive an inferior service under the NCC. In fact, I think that they will receive a superior service. Of course, business customers have the opportunity to shop around these days if they are not satisfied with the service or the price that the Post Office is offering them. The whole point of the new structure of the NCC is that complaints will be dealt with just as they are dealt with currently. There will be no diminution of the representational functions of the postal sector or its role in dealing with complaints.
The noble Lord, Lord De Mauley, mentioned access to post offices and asked whether the clauses refer to actual post offices or simply to outlets. I refer him to one of the consultation documents published around the time of the Statement, which stated categorically that 99 per cent of the population will be within three miles of an outlet, and that nine out of 10 people will be within one mile of an outlet. So they refer to outlets, not to a temporary service.
We propose that the new body will have the critical mass to engage effectively with government, regulators and industry sectors on the basis of expert and informed analysis, and with the benefit of being able to draw on experience and expertise across several sectors. The responsibility and authority to speak for consumers would rest with a single organisation, thus providing a stronger and more effective policy voice in the UK and the EU, as I have already said.
Initially, the new council will take over most of the functions and duties of Energywatch, Postwatch and the existing National Consumer Council. Other consumer bodies are not included initially in recognition of the recent reforms to consumer representation in some sectors, such as water and rail, or where there is no need, such as in financial services and electronic communications. These latter sectors already follow the model that we are proposing for energy and postal services, which have a single point for consumers to access help and advice in the form of Consumer Direct. I already made that point to my noble friend Lord O’Neill of Clackmannan, so I shall not repeat it.
It is important to note that the new council will represent consumers across all markets; there are no caveats for any sectors. Amendment No. 100 would prevent the abolition of Postwatch and would therefore deny consumers in the postal services sector the benefit of having a stronger, more coherent consumer advocate to represent their interests. I understand that some noble Lords are particularly concerned that the postal services sector needs a stronger consumer advocacy body to represent consumer interests in relation to post office closures. I agree with my noble friend Lord Borrie that we have already covered most of these issues, but I should say that in recognition of the importance of this issue to consumers, the council will maintain the current function assigned to Postwatch to investigate any matter relating to the number and location of public post offices under Clause 15.
Postal services consumers will also benefit from the introduction of redress schemes to ensure the resolution of complaints and to provide compensation or other forms of redress where warranted. Postwatch does not have the statutory functions to do that—and rightly so—so the Government are introducing a redress mechanism that must be independent from both parties involved in a complaint to ensure that the decisions reached on each case are fair and impartial. There is currently no such redress mechanism. If that proposal was voted down, we would be removing the option of redress that the Government propose and which consumers do not have under the existing set-up.
I thank the Minister for his helpful response, and I thank the noble Lord, Lord Borrie, and the noble Baroness, Lady Miller of Chilthorne Domer, for their interventions. I apologise, as the clause stand part debate on Clause 29 has already taken place. I shall carefully consider all the points that have been made and, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
Schedule 3 agreed to.
Clause 30 [Designation of the Consumer Council for Water for abolition]:
101: Clause 30, page 17, line 31, at end insert—
“( ) Such consultations, as set out in subsection (3), shall not take place before 2011.”
The noble Baroness said: The amendments would remove from the Bill the reserve power to bring the Consumer Council for Water under the National Consumer Council. Their purpose is to probe the Government on why the Consumer Council for Water is to be included in this body.
Amendment No. 101 is more than a probing amendment. I will lay out arguments as to why we feel it is insufficient to put a date into the Bill by order. At the very least the Bill should contain the earliest date—a “not before date”—by which this should happen. The other amendments are consequential on the removal of the Consumer Council for Water from the provisions of the Bill.
Some four years ago, when the noble Lord, Lord Whitty, was the Minister, we sat in this very Room and debated the setting-up of the Consumer Council for Water. The noble Lord made a very good case as to why we should set up the body and the Government subsequently did so at a cost of about £1 million—and very good value it has been to date.
There are three mechanisms driving the world of water. One mechanism is the pricing round overseen by the regulator, Ofwat, and another is the water framework directive which aims to bring all water up to a qualitative standard by 2015 in the first round. The directive also addresses some of the issues of quantity and use of water. It is, of course, a European directive but it was initiated in the UK and subsequently taken through Europe. The third mechanism is the issue of climate change, which has put more pressure on the difficult balance between the consumer’s need for water, which has increased over recent decades, water-hungry appliances and the now much more appreciated need for enough water to sustain the natural environment so that biodiversity is not affected in our wetlands and to sustain an adequate river flow. The complexities surrounding water are many.
A very distinct timeline has been drawn out and there is an interaction between the water framework directive and the pricing rounds. I asked the Consumer Council for Water to draw up a timeline showing what it would be doing at each stage. Its reply runs to five pages and so I shall not read it out in extreme detail. It shows how essential is the involvement of the Consumer Council for Water in both the pricing round and in the water framework directive’s implementation.
I remind the Minister—I am sure he knows—that the water framework directive contains a provision which requires public involvement. It cannot simply be left to the Environment Agency to involve panels of the usual suspects. It needs a strong consumer voice running all the way through the implementation of the water framework directive.
I draw the Minister’s attention to an important date. Draft river basin management plans will be published for public consultation in December 2008. That process will run for a year until 2009, when the final plans are published and will have a formal response. The importance of that directive, and of getting both it and the consumers’ input into it right, means that the CCW should not be messed around with before that date.
In parallel with that is the pricing round. In January 2010 companies will, for example, be deciding whether they will appeal to the Competition Commission on the price limits put on them in 2009. That pricing round will almost be finished, but not quite, and until 2009 the CCW’s input into that round will be critical. We have only to look back over the past year to see consumers being asked to use much less water, hosepipe bans, leakage rates being highlighted and so on. It is a very important balance. The regulator, Philip Fletcher, has furnished us with a copy of his letter to the Minister asking that the CCW be free to concentrate on fulfilling its remit over the next few years.
The Government still have to make the case for incorporating the CCW into the NCC at all, but if they do so, if the Minister looks at the timeline, there is a moment of calm, after one pricing round, when the water framework directive is being implemented but does not have any of those important crunch points. That would be at the end of 2011, which is why I have chosen that year for my amendment. I suggest that any order that the Government are thinking of making to incorporate the CCW should not be made before that date.
I would be interested to hear the comments of other Members of the Committee who have a great deal of expertise on the issue of the CCW and the water regime. I beg to move.
I support the noble Baroness, Lady Miller, in her Amendment No. 101. Those who support, as many do, the proposal that consumer bodies should be brought together as desirable within the new council have to recognise that the case for water, for reasons that the noble Baroness has just set out, may well be different, certainly with regard to timing.
Amendment No. 101 deals with timing, and it is that which I shall specifically refer to. The question is, after all, whether the consumer will be best represented in the very special case of water, compared with personal services, energy and the like. Will he be better served by allowing the Consumer Council for Water to be subsumed within the new council in 2008, as the Bill would allow, or should there be provision, as in Amendment No. 101, that the process cannot start until 2011? The case is very strong because of the special circumstances of water. I am not suggesting that ultimately there will not be a case for bringing the water sector within the council’s remit. The probing amendments give the Minister an opportunity to make that case, but the case for delaying any deliberation on this issue until 2011 is very convincing.
Let us remind ourselves that the consumers are not greatly enamoured with the water sector. You have only to remember the press this summer about drought orders, the water companies’ return on capital, which some saw as excessive, and the implications of environmental impacts, not least with the water framework directive. These and other issues created a lot of public interest. There has been consistent extreme criticism, not just of the role of Ofwat in trying to monitor the price limits for the water companies but also of the Environment Agency. It needed the Consumer Council for Water, which came into existence only in October 2005, with its new statutory powers, to bring consumers into a position where they could influence much more directly the regulatory roles of Ofwat and the Environment Agency.
Many of us—including the Select Committee on Science and Technology, which I was privileged to chair, and which produced a report in June 2006—came to the conclusion that, in the admittedly short time that the Consumer Council for Water had then been in existence, it had started to bring the consumer more centrally into deliberations on how our water should better be managed for long-term continuity of supply and to get much better consumer ownership of the clear problems about how demand can be curtailed. For example, why do we use 160 litres of water per capita when other countries in Europe, our neighbours, with standards of living which are not dramatically different, appear to manage with a lower consumption per capita?
Those are issues which we will never resolve unless consumers can buy into the issues. When they see leakages in the streets and hear that some water companies have a leakage rate of 30 per cent or more, it is not surprising that they do not buy into it. Perhaps it has to be admitted from these Benches that the privatisation process did, indeed, cause further lack of ownership.
The Consumer Council for Water has clearly got off to a good start. It is trying to ensure that the consumer is properly represented, not just in the day-to-day issues about vulnerable communities or water supply and drought orders, but in looking at the medium-term issues of the water framework directive and the issues about the next round of price levels for water. It would be a great mistake to take an organisation which, after all, has only been in existence for 15 months or so and to suggest in the Bill that it has to be subsumed into the new council as early as 2008 or thereabouts.
If the Minister can find it in himself to give the assurance that Amendment No. 101 stands and that there is a time limit before which nothing will happen, it will give an enormous assurance to the consumers, some of whom might well see the advantage ultimately of water being treated in the same way as other consumer bodies. However, it would be a great mistake at this stage not to listen very carefully to the noble Baroness, Lady Miller, and to give favourable consideration to Amendment No. 101.
I support the Bill on this issue. I am always very dubious about people—it is usually Ministers—trailing the doctrine of unripe time as the justification for doing nothing. If we got anywhere near 2009 or 2010 there would be compelling arguments to take the matter on to 2014 or 2015 or beyond.
We must recognise that the technical functions of our consumer body are limited. They are important, but they are not the only functions. By technical here, I mean matters related only to water. On issues related to the pricing round, Energywatch, Postwatch and the National Consumer Council will bring far more to the table than an individual consumer body. Given that, on the pricing issue, a stronger, broader, deeper consumer protection body would better be able to deal with this.
It is certainly the case that until fairly recently the water watchdog has not been particularly effective at protecting consumers in England, and even with the powers it has had since 2005 there are still many problems. So in highlighting the difficulties of the water consumer, particularly in relation to price, I do not think it has all that strong a record, one worth protecting as we move into the next negotiating round. For example, the rigour with which Postwatch has dealt with the postal pricing issue will stand it in good stead.
On the question of Euro consultation, Energywatch in particular has a very substantial relationship with its European counterparts. A lot of work has been done on issues related to the energy directives, so the idea that only water watchdogs can look after water matters in Europe is not valid. Half or perhaps even two-thirds of the issues related to working the European system are all about understanding that system, so what you are actually dealing with does not really matter in some respects because engaging with the Commission and the extended bureaucracy in Brussels is the important issue. It is not always a question of the issues themselves.
On the issue of climate change, this is a kind of last-gasp excuse. We cannot tell ourselves that Energywatch has not been concerned with climate change. Indeed, on her own admission the noble Baroness has acknowledged that climate change as an issue has been written on the blackboard only relatively recently. Broader climate change concerns have certainly been included in the remit of the energy consumer watchdog.
What I am trying to get at here is that the three fundamental points made by the noble Baroness do not really have much substance when we set the role of a single consumer protection body against a broader one that brings in a range of expertise which, while not water-specific, would nevertheless include within it the water element. That is because no one is suggesting that all those working for the consumer watchdogs are going to be thrown out into the street.
A further point has not been addressed here—that of the monopoly character of the water industry and the need to have as broad and strong a range of expertise as possible to challenge the abuse of monopoly powers by the water companies. Again, a case can be made for a strong and effective national body to take on the water companies which for years have been running rings around Ofwat and the consumer protection body. Indeed, by the noble Earl’s own admission consumers are not happy with the water industry, one which has not greatly improved since 2005, although it has to be said that the consumer body has done good work in the intervening period. But an awful lot remains to be done and I am not sure if the resources of the existing consumer body are sufficient to meet the challenges ahead. A broader based and more effective organisation would, in my view, have a role to play.
What I am saying comes down to this: I wish that water would be brought in sooner rather than later, not simply for bureaucratic tidiness but because the water consumer deserves better and could be better served by a water consumer body operating as part of a larger organisation. While the case that has been advanced may superficially appear to be compelling, I do not think it is a good one.
As to the idea that we should simply wait until the existing challenges are out of the way when it will be okay to bring it into the larger body, there is never going to be an ideal time for any change in this area; there are always going to be other excuses. The case made by my noble friend Lord Whitty, the chair of the existing National Consumer Council, is the most compelling. We will have a concentration of expertise across a range of consumer protection disciplines that will be able to take on the particular challenges of the water industry.
This is not about Europe or regulatory pricing but about a natural monopoly. It is one with which we have to live but which we have to challenge to ensure that it is continually harassed to ensure that consumers get a reasonable deal, or at least a better deal than they have had so far. The existing Water Consumer Council, although it has improved and has received additional powers, has not been able to protect people. Therefore, along with the other consumer bodies that will be subsumed by the new National Consumer Council, the English water consumers will get a better deal if, as soon as possible, they are brought under the umbrella of that new body.
The effect of the amendments would be to remove the Consumer Council for Water from the scope of the Bill, including consolidation into the new council and the extension of redress schemes to the water sector. I am grateful to Members of the Committee for enabling us to debate this important issue, which focuses on the core objectives of the Bill to create a stronger, cross-sectoral consumer advocacy body while making consumer representation and redress simpler but more effective for the consumer.
Clauses 30, 31 and 32 concern the potential inclusion of the Consumer Council for Water in the new arrangements at some point in the future. Bringing the water sector within the scope of the new arrangements would only happen after proper public consultation and only if the results of that consultation showed that consumers in the water sector would receive real benefits from coming within the new arrangements. Amendments Nos. 109 and 110 would remove the water sector from Part 2 of the Bill. This would have the effect of removing the possibility of extending redress schemes to the water sector even after consultation in 2008. So, in effect, there would be no form of redress for consumers in that area.
Our intention is to strengthen consumer representation and redress by extending redress schemes to the water sector to ensure that consumers benefit from complaint resolution rather than simply complaint handling. Only independent redress schemes which can award redress—such as an explanation, an apology or compensation as appropriate—and whose decisions are binding on suppliers can offer consumers certainty of complaint resolution.
I listened carefully to the points made by the noble Baroness, Lady Miller of Chilthorne Domer, but Amendment No. 101 is all about seeking to delay the consultation on the inclusion of the water sector until 2011. This may not necessarily be in the best interests of consumers. The noble Earl, Lord Selborne, also focused on the timeline. My right honourable friend Ian McCartney MP has agreed to meet with Ofwat and the CCW to discuss the timescale for water in this regard.
The public consultation held by my department earlier this year sought views on the best time to consider the question of the inclusion of the water sector in the new arrangements. Some respondents agreed with the noble Baroness that the consultation should be later than the proposed date of 2008. However, many other respondents believed that the water sector should be included from the outset. There was a whole range of views.
We took the view at the end of that consultation that we would consult on the inclusion of the water sector in 2008. That recognises that the Consumer Council for Water needs time to establish itself and to start to tackle the new, important objectives that it has been given. However, consulting in 2008 will provide for a timely assessment of consumer representation in the water sector, to ensure that consumers in this sector benefit from the most effective system of consumer representation and redress available. If incorporated, the new NCC would take over the functions of the CCW and could be a stronger advocate for consumers than the current body. I refer to the points that my noble friend Lord O’Neill of Clackmannan made earlier. If it was incorporated into the NCC, it would of course maintain the existing sector expertise which currently the CCW has. All these issues are being discussed. Consultation is ongoing. I am giving the Committee the logic behind the Government’s position after an extensive consultation on the timeline. That is how we arrived at the point we are at today.
Moving on to Amendment No. 115, Clause 46 relates to orders that may be made by the Secretary of State requiring regulated suppliers to belong to a redress scheme. The amendment suggests that subsection (5) of Clause 46 is removed from the Bill. Subsection (5) provides that the consent of Welsh Ministers must be obtained before the Secretary of State can, by order, require a regulated supplier in the water sector for an area which is wholly or mainly in Wales to belong to a redress scheme. The Water Industry Act 1991, as amended by the Water Act 2003, devolves to the National Assembly for Wales certain interests in respect of water. The Government of Wales Act 2006 will transfer these functions to Welsh Ministers. It is likely that the power to require water and sewerage undertakers in Wales to belong to a redress scheme may affect devolved matters in Wales. I believe that it is appropriate to obtain the consent of Welsh Ministers when dealing with certain issues in relation to the water sector.
For the reasons I have given, I am not convinced that the proposed amendments represent the best way forward for consumers in the water sector at this point. Therefore, I support the retention of Clauses 30, 31 and 32.
I thank the noble Earl, Lord Selborne, for his support. His committee produced a very interesting report into water management, so he has recently been exposed to a particularly large amount of evidence on this issue.
I was quite surprised by the contribution of the noble Lord, Lord O’Neill, in one respect. He accused me of saying that we should wait for ever, and he said that there would never be an ideal time. I accept that there will never be an ideal time, but I suggested a specific time related to the pricing round and the timing of the water framework directive. Far from saying that it should be delayed for ever, I suggested to the Government that that would be the most ideal time if this move was going to be made. So I am not at all guilty of the accusation that he levelled at me.
I think that the DTI has slightly missed the point here. One of the reasons the Consumer Council for Water was set up under the Water Act, which of course was a Defra Act so I do not think that many of the officials will have been party to these discussions, was to balance the interests of the environment and the users of water that used a tap as opposed to swimming in it as fishes or anything else. When we talk of consumers, it is assumed that we mean human consumers, but a whole other part of creation uses water.
That is why the balance is so important. The noble Lord, Lord O'Neill, says that CCW has not batted particularly hard on behalf of the consumer. However, those consumers concerned with the environment feel that part of CCW’s job, as defined under the Water Act, was to bat for the environment as well and to be part of weighing up the balance. It is not all about the price. Of course that is important, but that is part of the regulator's job, which is why it is important that there is a knowledgeable consumer voice on the water framework directive which will ask people to manage their water environment in an entirely different way.
In summary, I am not convinced that the Government have yet got the message but I am very heartened that the Minister’s colleague, Mr McCartney, will be meeting the regulator. I wonder whether that meeting is likely to take place before Report so that, should we feel moved to ask the opinion of the House on the matter, the Government will be able to tell us about its outcome. We will then see whether that will be necessary. I hope that the Minister is nodding, so I hope that it will be before Report. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 30 agreed to.
Clauses 31 and 32 agreed to.
Clause 33 [Compensation for loss of office]:
[Amendment No. 102 not moved.]
Clause 33 agreed to.
Clause 34 [Transfer of property etc]:
[Amendment No. 103 not moved.]
Clause 34 agreed to.
Schedule 4 agreed to.
Clause 35 agreed to.
Clause 36 [Extension of the Council's functions: Great Britain]:
104: Clause 36, page 21, line 18, at end insert “including companies and industry experts who would be affected by such an order”
The noble Baroness said: The amendment would ensure that where the Secretary of State extended functions of the National Consumer Council, he would have a duty to consult not only the relevant legislatures and the council but those businesses and representatives of businesses as would be affected by the extension. Given that the National Consumer Council would, under Clause 21, have the power to establish business connections and to receive support from business and industry, it is important that where the functions of the National Consumer Council change, those companies and others that would be affected by such a change are consulted. If the Minister can assure us on the record that such consultation will take place under the powers of subsection (3)(c), I shall be happy to withdraw the amendment. I beg to move.
Clause 36 requires the Secretary of State to consult on any proposal to extend the functions of the council. The clause specifies that consultees must include the council; Welsh Ministers—where the proposal may fall within their jurisdiction; and such other persons as the Secretary of State considers appropriate. The amendment to the last category would add,
“including companies and industry experts who would be affected by such an order”.
Any consultation undertaken under the clause would be a public consultation. It is in the interests of good policy as well as the interests of good consultation practice to seek to reach all those potential consultees who may have a direct interest in the subject matter, or who may have a valuable contribution to make if invited to do so.
I suggest that the range of stakeholders consulted would depend very much on the nature of what is proposed and who may be affected by it. As the consultation would be public, it would certainly be open to anyone, including companies and industry experts affected by any proposed extension of functions, to contribute.
I hope that I have demonstrated that I am entirely sympathetic to what I take to be the intention behind the amendment: to ensure that the consultation process is fully informed by all those who have an interest or who can make a contribution. I believe that it would be difficult to provide a detailed description of appropriate consultees who might adequately meet all of the circumstances where the provision might be exercised, but I hope that the Committee will take some comfort from what I have said today and recognise that the amendment may not be the best way forward in all circumstances, although I understand the principle behind it.
I thank the Minister for his reply. Obviously, it is not exactly what I wanted, but at this stage I can do nothing but withdraw the amendment—other than to say that I am not happy. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 36 agreed to.
Clauses 37 to 39 agreed to.
Clause 40 [Interpretation of Part 1]:
[Amendments Nos. 105 to 108 not moved.]
Clause 40 agreed to.
Clause 41 [Interpretation of Part 2]:
[Amendments Nos. 109 and 110 not moved.]
Clause 41 agreed to.
Clause 42 [Standards for handling complaints]:
111: Clause 42, page 24, line 34, leave out “may” and insert “shall”
The noble Baroness said: I am sorry to have hesitated for a moment, but I thought that my noble friend Lord De Mauley would have been back at this point. However, I am delighted to move Amendment No. 111 and speak to the other amendments included in the group. This group of amendments seeks to strengthen the complaints handling procedure following the merger of Postwatch and Energywatch under the new umbrella body, Consumer Direct.
Amendments Nos. 111 and 112 go hand in hand to strengthen the provisions of Clause 42. Currently the clause allows regulators to make regulations to prescribe standards when handling complaints. However, one of the major concerns of the outgoing Energywatch is that there will not be adequate protection for those consumers facing the cut-off of their electricity supply. Amendment No. 114 would prevent the Secretary of State running a redress scheme or appointing a body to run such a scheme. This is a probing amendment to discover the Government’s policy on whether a redress scheme would be controlled by central government. I would have thought it important to ensure that a redress scheme is approved by the relevant regulator who will be independent of central government and have detailed knowledge of consumers’ needs.
Amendment No. 116 seeks to remove the reference to “relevant consumers”. All consumers using energy supplies are relevant where redress schemes are concerned. Amendment No. 117 changes the remit of what a regulator must consider in creating a redress scheme, raising the bar of performance from “good” practice to “best” practice. I am sure that the Minister has a good reason for setting the standard for a redress scheme at “good” practice. “Good” is good enough for most people, yet I should be interested to know why he does not aim for the best in this Bill. Our idea of best practice is where consumers can make rapid contact with the ombudsman instead of the current three-month wait and where recognised complaint handling procedures are a requirement for entry on to the scheme.
Amendment No. 119 fulfils the need to have approved standards for complaint handling procedures, while Amendments Nos. 120 and 121 ensure that the regulator would have to take into account the handling of individual complaints when designing a redress scheme.
Along with all noble Lords, I welcome the proposal for an ombudsman in these markets, but I am concerned about the future treatment of those consumers who need more than the simple advice that Consumer Direct can provide and who cannot afford to wait months for an ombudsman scheme to make a deliberation. Last year, Energywatch took 63,000 complaints, and followed up a further 223,000 issues directly with companies on behalf of consumers. Energy problems can be complex and urgent, so I find it hard to see how diminished support and longer waiting times represent a step forward in consumer services. I am concerned about what will happen to a consumer who has been threatened with having the gas supply cut off after March 2008. It is my understanding that the current Bill would require the new consumer body only to deal with those who have already been disconnected. At present, Energywatch intervenes when a consumer is at risk of being disconnected or is without an energy supply for other reasons. It is vital that Consumer Direct has access to good quality complaints data, to basic intelligence about what is going wrong in markets and how that affects consumers.
Indeed, I should be interested to know how consumer problems are to be dealt with in the interim transition. The Bill reorganises five bodies, will make hundreds of dedicated members of staff redundant and require complex transactions that will confuse consumers as well as reducing help and support for them. A £9 million saving is admirable, but I should be interested to take a note of the final collateral costs involved in staff payoffs and extra funds spent on the more complex processing of consumer complaints during the transition.
The Minister kindly hosted a meeting for myself and my noble friend Lord De Mauley in advance of the debate on Second Reading at which he said he did not have the exact figures for redundancies to be made during the merger. His officials mentioned that there were some figures from PricewaterhouseCoopers which had predicted an audit for the potential transition, but that at that stage they were not conclusive. I should be grateful if the Minister could give an estimate of the total number of redundancies involved in the transition if he has any further information in that regard.
There are many questions in this large group of amendments to which I hope the Minister will be able to give a full response. I understand that in some cases he will need written help to do so. However, I look forward to his words and to redrafting amendments in the light of his response for the Report stage. I beg to move.
I start by considering the modesty of the Government’s ambitions regarding the aim of “good” rather than “best” practice. We could all debate whether the best is the enemy of the good and so on, but if the Government are trying to introduce a new scheme they should seek to be as ambitious as possible. Given that, using the words “good practice” when most people will be looking for “best practice” is either a bit of sloppy draftsmanship or it requires an explanation. I should have thought that in Committee in the other place an amendment could be introduced to clear up the issue. It is not very ambitious to say, “We’ll try to do as well as we can. It might not be brilliant but at least it will be just about ‘good’”. To be frank, the ambition should be to aim for the best. In certain areas, this Bill demonstrates a degree of slapdash sloppiness, a lack of appreciation for the political pitfalls the Government could face when the Bill is considered in Committee down the Corridor. I would say only to my noble friend in as friendly a way as I can that things like this should be flashed up so that we do not have to trouble with them.
On the other matter, I do not think the issue raised by the noble Baroness about potential staff cuts is necessarily the point here. What we are trying to do in this legislation is to impose on the companies responsible for our utilities higher standards of service than they have previously provided. In the past, inadequate policing of consumer protection schemes by the regulator of these companies has meant that people have been denied access to the service. We all know that billing and failure to pay issues are very severe and worrying.
It is only about three years ago that there were very bad storms in East Anglia. The response of the energy companies to the power cuts there was, frankly, shocking. It emerged that one of the reasons for that—apart from the fact that maintenance had not been sharp or effective enough—was that the switchboard was swamped with complaints from consumers who knew nothing about what was happening. They had listened to the local radio station and then phoned the company; if they were lucky enough to get through, the company told them to listen to the local radio station.
However, it became clear that across the country this was not a uniform picture. For example, Scottish and Southern and Scottish Power, two of the five big power companies operating across the UK, had call centres located across Britain. When they were confronted with large-scale cut-offs—as they were rather more often than the East Anglian utility—they simply combined the services of all their call centres and took up every complaint. They had staff on call because the winters in Scotland tend to be a wee bit worse than in East Anglia and people were ready and prepared to do this.
It was an exceptional circumstance but, when my colleagues and I on the old Trade and Industry Select Committee in the 2001-05 Parliament looked at this matter, it was glaringly obvious that a number of companies had no fall-back arrangements. While the boxes for the speed of response to complaints were ticked most of the time—93 per cent reacted within two minutes or whatever; I cannot remember the figures—the point I am making is clear enough: we need to ensure from the outset that the new National Consumer Council will be able to insist that the regulator with responsibility for particular areas of consumer service learns the lessons of recent experience.
It is not the everyday problem that worries most people but the extraordinary problem. In some instances, of course, it is not that extraordinary because there are often severe winters, dramatic increases in snowfalls and winds that blow trees over power lines. That is somewhat inconvenient, as it was in East Anglia.
It is our duty to highlight these matters at this stage in the legislative process. Some of it should be done by the regulator insisting that the companies deal with it. Part of the essence of the new approach to consumer protection and consumer advocacy is that far more responsibility will be assumed by the companies than hitherto has been the case. If we achieve that, it will be a burden on the companies. They will not like it; they will complain that it is unreasonable and excessive regulation. But if people are in very cold houses in difficult winter circumstances, if they are subject to flooding or whatever, they are entitled to the best possible service and entitled to expect that the companies would anticipate the worst possible scenario.
One of the effects of climate change is not only that it is warm when we do not expect it to be but that, as we found over the Christmas and New Year period, changes in weather are now much more extreme. Sometimes you have winds in excess of 70 to 80 miles an hour, as happened in Edinburgh on two Hogmanays in a row, which meant that the celebrations had to be cancelled. So we are not just talking about the important issue of people being cut off because they cannot pay or because their bills have been badly handled by companies—as a constituency Member, I well remember the difficulties that we had getting through to the accounts department and getting it to accept that there was an issue.
Equally, we need to have spelt out in greater detail than the Minister gave on Second Reading the Government’s intention to ensure that we will have in place schemes that will give the companies and the regulator no place to hide when people have immediate problems. When the cut-off is done, when the family is left without gas or electricity and they are freezing cold, assurances that something will be done quickly need to be chiselled into granite, they cannot be simple paper promises from either Ministers or the regulators because we know that, in the past, the regulators have been sloppy. We know also that although the companies have improved in a number of respects they are still not properly geared up to deal with extremities of weather. We hear a lot about climate change, but we do not get a proper appreciation of the nature of the changes in weather that we are experiencing and the impact that that has on supplies of gas and electricity.
Therefore, I would like to think that the Minister will be even more robust. In his wind-up speech on Second Reading, I got the impression that he was getting the message, but it is not enough for just him to get the message; the message must get out to the appropriate players who will be affected by the legislation. The past performance of a number of energy companies in recent years has left a lot to be desired. Not only should we have carrots, we should have sticks. I want substantial punishments for those companies that do not deliver the goods when we have problems of that nature—whether for the individual family or the communities, which are often isolated communities, if they do not have their electricity or gas reconnected within a reasonable time.
As I said, there are examples—although I am a Scot, I am not defending or praising those companies because they are Scottish—of parts of the country which will feel the brunt of the new climatic conditions in which we live. It is essential that we take proper steps at this stage to make it clear to the companies and the regulator that we need a higher level of performance and awareness. Simply to talk about “good” is not good enough; it must be the best.
If anyone is wondering why I have been sitting quietly here at the back it is because I thought this group of amendments gave me the opportunity to come in from what I might call a slightly wider angle. I could link it to my noble friend’s Amendment No. 114 in which, on my line of thinking, she has left out the wrong paragraph—paragraph (b) rather than paragraph (a)—but I do not mean to elaborate on that or cause dissension in the ranks on this side of the House.
I hope that the noble Lord, Lord Borrie, will recognise the main point that I am seeking to make and that it will become clear. However, before I say anything else, I ought to declare something rather curious—I think it could be called a potential prospective interest—in that I am chairman of the Council on Tribunals. Shortly before Christmas, a Bill was debated in this very Room that would turn the Council on Tribunals into an Administrative Justice and Tribunals Council, which would give it an interest of a much wider kind, including an interest in ombudsmen. But that is not the situation at the moment: at this stage the council has no locus in that respect, although one of the main parliamentary ombudsmen is an ex-officio member. Having acknowledged that point, I emphasise that I am speaking only for myself.
I find it very strange indeed—I am using an understated word; perhaps I should say “curious”—that we have here a Bill which appears to envisage the possible creation of rival sets of ombudsmen serving consumers. The noble Lord, Lord O'Neill, spoke of the Government seeking to create a new scheme. But that is not what the Bill states: the Bill envisages the possibility of multiple schemes. I shall come back to that.
I was surprised that this did not attract more attention on Second Reading, in which debate, unfortunately, I was unable to take part. It was adverted to by my noble friend at column 971 when she asked whether it was likely that there would be more than one scheme, and then perhaps most crisply and notably by the noble Lord, Lord Borrie, who said:
“Having a number of schemes competing, no doubt, to provide the best service for customers, would seem a rather odd system of adjudication in this country. I do not think that it occurs in ombudsman schemes in insurance, banking and so on”.—[Official Report, 4/12/06; col. 974.]
Then the noble Lord, Lord Razzall, built on that point and suggested that,
“it would be better for the existing ombudsman scheme to be the one approved by the DTI and with which everybody will comply”.—[Official Report, 4/12/06; col. 1006.]
In response to all of that the Minister confirmed:
“The fact is that under the Bill we are leaving it to industry to come forward and seek approval of suitable redress schemes, in the plural, so the situation could be that several schemes are approved” .—[Official Report, 4/12/06; col. 1012.]
As an individual, I find that very curious. The Bill, in creating the new National Consumer Council, is designed to create greater coherence and reduce confusion for consumers, but it includes this proposal. If I found a way to bring forward a proposal for a rival parliamentary, health service or local government ombudsman, I would be laughed out of court. In the financial services field, which was littered with ombudsmen, the Government went to considerable trouble to create one coherent, statutory financial services ombudsman scheme. I do not know of any proposal in a Bill being discussed on the Floor of the House or anywhere else to have rival legal services ombudsmen, so why do we have these proposals? That is my fundamental question.
My curiosity is aggravated because I could just about understand the proposal if it was about choice for complainants and consumers, but it is not; it is about choice for firms as to which scheme they join. There is an obvious risk that what is in the best interests of the business rather than the consumer will be at least a factor in some decisions. I am not alone in that view. I cannot speak for the British and Irish Ombudsman Association, although I know it quite well, but I feel that I should place on record what it said in response to the relevant question in the consultation just under one year ago. Referring to the possibility of multiple schemes, it stated:
“We feel this”—
that is, multiple schemes—
“causes confusion and different standards, processes etc. BIOA supports a fully joined-up and straightforward approach to Ombudsman services for the consumer. It sees any attempt to streamline and simplify the process of dealing with complaints and receiving redress as being highly desirable and in the public interest. This would include having at the most, one scheme per industry/sector”.
I note—and I should recognise this before inviting the Minister to comment—that Clause 48(2) requires a regulator to have regard to the number of other redress schemes already in place in making decisions about the interests of consumers. That implies a recognition that a plethora of schemes is not desirable. But where is the balance between one scheme and a plethora of schemes? Although the subsection does not use the word “plethora”, how will that judgment sensibly be made? I remain extremely puzzled and I would appreciate any comment from the Minister on the reasoning in this regard.
Perhaps I may ask him a specific question. I have already referred to financial services and legal services: has any other department in Whitehall gone down this path of creating the possibility of competing ombudsman schemes being chosen by the firm, not by the customer—or, indeed, of competing ombudsman schemes at all? We need a clearer understanding of the thinking behind that and the justification for it before we can conclude consideration of this part of the Bill. The noble Lord, Lord Borrie, made a good point at Second Reading and I hope that he thought it was a good point to make today. I am very grateful to him.
I have considerable sympathy with the points that have just been made and I would like to hear the Government’s justification for their approach. However, I want to concentrate on the first of the amendments in the group, which is important. I support the amendment—or, at least, I would support a form of wording that achieved the same objective. I am grateful that the noble Baroness, Lady Wilcox, has raised the whole question of how we deal with complaints under this new structure.
Part of the Government’s strategy, as I understand it, as my noble friend Lord O’Neill said, is to ensure that companies meet better standards of complaints handling than is currently the case. That requires the regulators to be heavy and requires the Government to be heavy with the regulators. Although I do not support every amendment to delete “may” and insert “must” or “shall”, I support this one because unless the regulators concerned, Ofgem and the postal services regulator, accept as central to their tasks upgrading the standards of the companies within their field, this will not work.
Large-scale general complaints and general issues that have been raised with Energywatch and Postwatch will not be able to be dealt with by Consumer Direct. That has been recognised in relation to emergency provision within the new NCC. But between those two types of complaint, the emergency complaint and a specific complaint that can be easily dealt with, Energywatch and Postwatch deal with a whole range of complaints. In most other industries, such complaints would be seen as the responsibility of the company. Part of the failure of regulation in the post-privatisation industries is that that has not been seen as a priority by the regulators. It is, therefore, important, that regulators do not have an option to specify higher standards of customer service, which they will regulate and for which there will be sanctions for failure, but have an obligation to do so.
I recognise that there is an issue of propriety, that the regulators are independent and, therefore, that a “must” or a “shall” would raise certain issues, but this matter is so central to the achievement of the strategy that the Government are embarked on—and so central to what ought to have been the responsibility of the regulator in any case—that it is important that there is no discretion but for the regulators to set standards. That seems to be the objective of the first of the noble Baroness’s amendments. The regulators may have some discretion in relation to the subsequent clauses—I do not necessarily support her second amendment in the group—but being forced to set those regulations must be a central pillar of the way that we do this.
There is another point: even if the regulators set stringent standards, are prepared to enforce them and are required to do so, it would take some time before the companies adjusted their process, practice and culture to achieve those standards. In the interim, there is an issue as to how those kinds of complaints and queries are dealt with. Ultimately, they should be dealt with internally within the companies, and the stronger the regulator is in forcing the companies to do that, the better. But there is also a transitional issue as to how those complaints are dealt with in the interim. Having Government clarification of this on the record would be helpful. Perhaps they could indicate at a later stage how the regulators will be obliged to do what the amendment is intended to make them do.
Perhaps I may comment on the points made by the noble Lord, Lord Newton of Braintree, to whom I am most grateful for picking up on my brief comments at Second Reading which expressed surprise and queried the provision for redress schemes in the plural. I wondered whether some new type of competitive adjudication schemes would be introduced in this country for certain fields of interest. I agree with pretty well every word that the noble Lord has uttered.
I would add only that it is not just this part of the Bill that talks about redress schemes in the plural; the whole of Schedule 6 is devoted to them in relation to estate agents and, therefore, envisages something remarkable. So far, we have not heard sufficient explanation from Her Majesty’s Government as to why that is the case and whether any precedents are being relied upon.
This seems to be a good moment for me to come in. I shall deal with Amendments Nos. 111 and 112 to Clause 42, but before that I shall answer a couple of questions. The noble Baroness, Lady Wilcox, asked about how the redress schemes apply to relevant consumers. In the energy sector they apply to private consumers and businesses, but not suppliers. Both the noble Baroness and my noble friend Lord O’Neill mentioned the protection of vulnerable consumers. I repeat that the Bill provides under Clause 11 for the council to have specific powers to investigate complaints made by vulnerable consumers in the designated sectors and under Clause 12 to act on behalf of consumers who become vulnerable through disconnection of their gas or electricity supplies. So there is provision for immediate support for vulnerable consumers who find themselves in difficulty, particularly in relation to disconnections.
Returning to Amendments Nos. 111 and 112, subsection (2) states that the regulator may make regulations in respect of all complaints or those of a specified kind. Amendments Nos. 111 and 112 replace each “may” with “must”. It is normal for legislation to use the word “may” when conferring a power, because the legislation does not and cannot say when the power should be exercised or how it should be exercised. The timing and content of regulations is not prescribed in the Bill. These provisions will need to adaptable, to be applied on a sector-by-sector basis, with each regulator being able to take a different approach to suit the sector’s own particular requirements. It will be for the regulator to determine the need to make regulations, or when and how to amend them in the future. If there is to be a duty, then the legislation must lay down clearly what the person is duty-bound to do. If there is to be discretion as to when and how the regulator is to act, then “may” is legally the right word.
I hope that that adds some clarity, but I appreciate the points made by my noble friend Lord Whitty and I will consider them further. However, I would point out that we have consulted with the regulators concerned and they are broadly content with the approach we have adopted. As drafted, the power allows a regulator to take a view about whether and when such regulations are necessary.
I turn now to Amendment No. 114, which seeks to alter Clause 46 covering the requirements relating to redress schemes. This clause introduces a statutory requirement for service providers in the energy and postal services sectors to belong to a redress scheme, and will in effect give consumers in those sectors greater assurance of achieving certainty of resolution of their complaints. It allows the Secretary of State to make orders requiring regulated suppliers in those sectors to belong to a redress scheme. It specifies that such a scheme must be approved by the relevant regulator or be administered by the Secretary of State or a person appointed for the purpose, and designated as an appropriate redress scheme. Before an order can be made under this clause, the Secretary of State is required to consult the relevant regulator and others who represent those with an interest in the matter. The Secretary of State must be satisfied that there is at least one redress scheme that regulated suppliers who are required by order to belong to a scheme are able to join before making such an order.
Moving on to the point made by the noble Lord, Lord Newton of Braintree, about having several schemes up and running and questions asked by other noble Lords and my noble friend Lord Borrie about whether there are any precedents, the answer is yes, for example in the telecoms sector. The Department for Culture, Media and Sport and the Department of Trade and Industry are responsible for the telecommunications and broadcasting regulatory regime where two telecoms redress schemes are operating. It is our view that regulators are best placed to decide on the appropriate number of schemes to be approved to operate within each of the sectors. In approving a redress scheme, the provisions place a requirement on the regulator to have regard to the total number of qualifying schemes available to the relevant suppliers. But that does not mean that there has to be a plethora of schemes; there can be just one. That is the current position.
In the event that no scheme is set up by industry, the clause contains provisions for the Secretary of State to establish one. This is an additional guarantee that in the unlikely event that industry is not able to put a scheme in place, the Secretary of State has the power to establish a suitable one so that he will be able to make an order requiring suppliers to belong to a scheme. Amendment No. 114 would remove those contingency arrangements. I hope that noble Lords will accept that this provision is needed as a fallback to give an assurance that a qualifying scheme will be available for suppliers to belong to, and so that the Secretary of State can bring these requirements into force. The essence of these reforms stems from our firm belief that empowering and protecting consumers is fundamental to the achievement of a successful, fair and competitive market. We want to give consumers a simple and effective system of redress that is easily accessible and offers the best all-round protection.
A basic requirement for such a system must involve the consumer interest being taken into account. These provisions have been drafted to provide explicit assurances on several levels. The introduction of redress schemes means that consumers will benefit from the certainty of a resolution of a complaint and the provision of redress where appropriate. In approving the redress schemes, the relevant regulator will be required to have regard to established good practice such as, for example, the guidance published by the British and Irish Ombudsman Association. Regulatory oversight will help to avoid the undue proliferation of schemes and ensure monitoring of standards of performance for consumers seeking redress. On balance, we feel that a regulator is best placed to ensure that sector-specific issues in the interests of relevant current consumers, or indeed those who may become consumers in the future, are captured and considered as part of the approval process, including the number of other redress schemes that are available to regulated suppliers which qualify as suitable redress schemes. The consumer’s interest is key to this package of provisions and must be seen to be taken into account.
Amendment No. 117 relates to Clause 48. The clause outlines the matters a regulator must take into account prior to approving the key features of any qualifying redress scheme. The clause places a requirement on regulators to consider the provisions of the scheme and the manner in which it must be operated, the interest of relevant consumers, including the total number of qualifying schemes, and the recommendations of any generally accepted principles of good practice that may be applicable to the operation of a redress scheme. The amendment seeks to replace the word “good” with “best” in this instance.
I believe that we agree on the fundamental issue of the need to ensure that any approved redress scheme conforms to generally accepted criteria for recognition in the provision of redress. An example of such criteria would be the guidelines provided by the British and Irish Ombudsman Association, which covers issues such as independence, fairness, effectiveness and public accountability. We fully understand the sentiment behind replacing “good” with “best”. On the one hand, we want consumers to receive the best treatment under these redress schemes; on the other hand, we do not want to place too onerous a burden on a regulator in trying to evaluate and compare all the good practices in order to determine which is the “best” practice. I therefore want to consider the amendment further to see if we can accept it.
We are giving regulators the power to make regulations to prescribe complaint-handling standards that would be binding on suppliers. Information about suppliers’ levels of compliance with any prescribed standards would be placed in the public domain. That is a fundamental aspect of the new model for consumer redress being introduced by these measures. The amendment would place an additional burden on regulators and scheme administrators in determining whether suppliers operated appropriate and effective schemes. We believe it is possible to achieve the desired outcomes through the imposition and monitoring of performance in meeting complaint-handling standards.
Amendments Nos. 120 and 121 concern the terminology used to describe the Consumer Direct service, which is supported by the OFT. The paragraph concerned refers to the necessary flows of information to be established between the Consumer Direct service and the redress schemes. Consumer Direct is a public consumer advice scheme supported by the OFT. We cannot refer to it by name in the Bill, as the service has no legal personality. The word “public” describes those to whom Consumer Direct offers consumer advice—the public. Advice is provided to an individual member of the public in a one-to-one conversation with an adviser. As I have said, Consumer Direct is simply the name under which the service is provided. The draftsman has given us a good set of words, and we hope that noble Lords will understand why the Government feel it appropriate to form the clause in this way.
On Amendment No. 122, we envisage that a regulator should have the option to withdraw approval from a scheme either generally or simply in relation to specified consumer complaints. The amendment would risk disadvantaging consumers in respect of whom a scheme was operating satisfactorily by requiring the regulator to take an all-or-nothing approach to removing approval.
Clause 49 sets out provisions on how the application and approval of redress schemes is to be conducted, and it is important that it stands part of the Bill. It enables the regulator to determine the manner in which an application for approval is made, and places a requirement on the scheme administrator of an approved redress scheme to provide notice of any changes to the scheme within a specified period. It also allows a regulator to refuse or withdraw approval for a scheme in accordance with the procedure in Clause 50. I apologise that it has taken so long to go through all these amendments, but the group was quite large.
Before my noble friend gives a final proper response—at least, I assume it will be—may I say briefly that I am grateful for the Minister’s comments and will reflect on them, although I continue to feel that there are some problems here? He is right that there is more than one ombudsman in the telecommunications sector, but I believe that he acknowledged that the DTI had also had a hand in that proposal, albeit with the DCMS alongside it. I should put on the record that I was aware of that, as are others. It would be putting it mildly to say that there are mixed views on the merits of that for consumers. I shall not add to that at this stage.
The other point that I want to put firmly on record is that there is the most glaring disparity between what is envisaged here and what the Government have done in relation to financial services. I therefore hope that the Minister will reflect on what I have said, and on what the noble Lord, Lord Borrie, has said, too.
This is a large group of amendments. Amendments are put into large groups, which sometimes makes it difficult for the Minister to respond on his feet. I am fully aware of that. We try very hard, when looking at the groupings that the Government have given us, to see if there is any logical way that we can get through them in a way that the Minister can give a reply that he feels comfortable with. I thank the Minister very much for the amount of work that he has personally done in trying to respond to these amendments.
I must say that it has been a delight to have the support of the noble Lord, Lord O’Neill, for the first time in all these debates, on “good” and “best practice”. It was rather brave of him to refer to sloppiness and slap-dash drafting. I am not sure that I would ever have the courage to accuse Her Majesty’s civil servants of slap-dash and sloppy drafting. I shall not line up with that one, but I am delighted to have the noble Lord’s support on “good” and “best”. I think that “best” is best and I know that the Minister will go away and have a look at that point.
I then had my wrist slapped by the noble Lord, Lord Newton of Braintree—my noble friend Lord Newton of Braintree—who picked up on the point made by the noble Lord, Lord Borrie, who was Director-General of Fair Trading when I was chairman of the National Consumer Council and is a man for whom I have enormous respect. To hear him being quoted made me sit up and start making a few notes. I will read very carefully what the Minister said in reply. I received a bit of a jolt at one stage, because I thought that he said something about the way that the legislation has been drafted, or the way that it will move forward, meant that it is possible for there to be only one ombudsman. I must have got that incorrect, or maybe I was dreaming, so I will read carefully what the Minister actually said.
I am delighted to have the support of the noble Lord, Lord Whitty, who is, of course, the present chairman of the National Consumer Council and will be taking it forward through this enormous change. He is right to be concerned over a body that was never intended to handle complaints, whose duty was over many years, and during the years that I chaired it, to do the blue-skies thinking that no other consumer body worldwide was ever able to do. It was funded by the Government to take its time and to write good reports that we could build on. It was 11 years ago that I produced the piece of work that raised concern about the selling of sugar and fat to children through television advertising. It is only now that we see that work coming to fruition. Sometimes the best work takes a long time to get there.
I am grateful to everyone who has spoken to the amendments. I am grateful to the Minister that he was able at this late stage to take so much time and trouble to try to give us all the answers that we would want. We will go away and consider them and I fully understand that some of the answers will have to be written. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 112 and 113 not moved.]
Clause 42 agreed to.
Clauses 43 and 44 agreed to.
Schedule 5 agreed to.
Clause 45 agreed to.
Clause 46 [Membership of redress scheme]:
[Amendments Nos. 114 and 115 not moved.]
Clause 46 agreed to.
Clause 47 agreed to.
Clause 48 [Membership of redress schemes: supplementary]:
[Amendments Nos. 116 to 121 not moved.]
Clause 48 agreed to.
Clause 49 [Approval of redress schemes: supplementary]:
[Amendment No. 122 not moved.]
Clause 49 agreed to.
Clauses 50 and 51 agreed to.
123: Before Clause 52, insert the following new Clause—
“Standards of competence: commencement
Section 22 of the Estate Agents Act 1979 (c. 38) shall come into force, and the first regulation under that section shall be made, within six months of the passing of this Act.”
The noble Earl said: We have moved on to Part 3, which deals with estate agents. At this stage I must declare my interest as a surveyor and a consultant to an estate agency firm, something which most noble Lords have known for some time.
We are behaving rather strangely in that we are one of the few countries in the world to have no restrictions to becoming an estate agent. Pretty well anyone can set up an estate agency without qualifications, training, supervision or regulation, and yet that person could well be handling what is for the great majority of people the most important transaction they are ever likely to deal with: the buying and selling of their property. That is in marked contrast not only to what other countries are doing, but also to every other professional sector in the United Kingdom. How can the Minister possibly justify this position? When one compares the situation with regard to estate agents with that of financial advisers, legal advisers, conveyancers or surveyors, there is a marked difference. All of the other professional bodies are subject to considerable regulation by which they have to abide.
As I said, I am a consultant to an estate agent’s company and a surveyor. It took six years to become fully qualified as a surveyor with the appropriate initials. That is a lengthy training and there are very strict regulations associated with the profession. However, I needed none of that training to set up as an estate agent. To me, that is quite wrong. Noble Lords will recall that at Second Reading I also raised the question of someone in the City—I cited the example of my daughter—having to take a vast array of examinations to meet the regulations laid down by the Financial Services Authority in order to sell a few shares. In marked contrast, when dealing with something that is usually far more important to people—their property—a person may have absolutely no qualifications or training at all. This Bill provides us with a golden opportunity to set a standard of competence for estate agents that would lift them from being, along with politicians, the most disliked and disrespected group of workers up to something rather better, on a par with their financial counterparts.
We are lucky in that we have the Estate Agents Act 1979 because in Section 22 provision is made for the regulations. All the Minister has to do is enact those regulations, and that is the purport of my amendment. I understand that the Minister’s position is not an easy one. He has come into a department and is doing a good job, having been presented with a Bill into which he had no input. But, as we have been discussing it, it is clear that this is quite a peely-wally Bill—as we say north of the Border. We have all been nice about the legislation, but will it really help the consumer? In parts, yes, but as the noble Lord, Lord O’Neill of Clackmannan, made clear a few moments ago on Amendment No. 111, he is appalled by the modesty of the Government’s ambitions. Here is a chance for the Government to redeem themselves and try to help the consumer.
The Minister stated clearly the Government’s position at Second Reading. He is against the regulation and licensing of estate agents, but is happy to have a redress scheme. However, I put it to him that that is far too late. The event has happened and all we are doing is trying to clear up the mess afterwards. I am trying to prevent the mess happening in the first place. I am not alone in thinking that regulation and licensing are certainly one way forward. Indeed, I know of no respectable estate agent anywhere in the country who does not want this. We are all fed up of cowboys, but the Government are supporting them because they are the ones who can drive the cowboys off the street with this legislation but are making no attempt to do so.
The Minister is also at odds with his Chief Whip and his Deputy Chief Whip. In 1977, Bryan Davies MP, now the noble Lord, Lord Davies, backed by Mr Bruce Grocott MP, now the noble Lord, Lord Grocott, put forward the Estate Agents Bill. If he happened to look at Clause 20 of that Bill, which the Government took up and which became the Estate Agents Act 1979, he would find their desire for regulation. The section states:
“The Secretary of State may by regulations made by statutory instrument make provision for ensuring that persons engaged in estate agency work satisfy minimum standards of competence”.
And so it goes on. The Minister has a problem on his own side.
The Government are also at odds with themselves, because unfortunately, and most unusually for government civil servants, they do not seem to be talking to each other. Just as we are discussing a Bill that prevents estate agents being regulated, in the main Chamber they are discussing the Legal Services Bill, which provides exactly for the regulation of estate agents. The Minister might know about that Bill. I refer him to Part 5, which provides for alternative business structures to be set up that can include estate agents. Those estate agents will be regulated, because regulation is needed under that structure.
Big estate agents increasingly want to amalgamate with lawyers. We discussed that quite a lot in debates on the home information packs. The Government wanted to make one-stop shops at which you could get your surveyor, your estate agent, your mortgage and your legal advice all in the same building. Those people will have to be regulated. I draw the Minister’s attention to the Explanatory Note to Clause 175 of the Legal Services Bill, which states:
“Prospective ABS firms”—
that is, alternative business structure firms—
“(referred to in the Bill as “licensed bodies”) will have to be licensed by a “licensing authority” (either an approved regulator that has successfully applied to become a licensing authority, or the Board itself)”,
where no appropriate licensing authority is in place. The Government set out in the Explanatory Notes to that Bill all the advantages that this will give people. One advantage that they rate so highly is increased consumer confidence. Is that not what we are talking about in relation to the Consumers, Estate Agents and Redress Bill? Is not increased consumer confidence and protection exactly why we are discussing the Bill at some length? The Government say that increased consumer confidence is a great thing with one Bill that is being discussed in the Chamber, but that it is not what they want at all with this Bill.
My noble friend Lord Newton and the noble Lord, Lord Borrie, made a point about the multiple redress schemes when speaking to Amendment No. 111. The noble Lord, Lord Borrie, was the one who pointed out that those schemes also apply to estate agents. So where will the consumer be in the future? At the moment, he has a very low opinion of any estate agent. Politicians, estate agents and second-hand car salesmen are at the bottom of the list.
I do not think that they are even on the list. My experience of them certainly does not warrant them being on it. What will the consumer be faced with in the future? He will hope that the Bill will do something about estate agents, but all he will find is that there will be a redress scheme for some estate agents. However, other estate agents will be regulated and licensed. So, what does the consumer do when making his choice? How will he find out the information that we have a multi-tier system for estate agents, some of whom have to meet certain standards and some of whom do not?
There will be a third tier of estate agents who will still be the cowboys that we all want to get rid of and who will avoid this provision until the last possible moment. They do not need to tell anyone that they are setting up as an estate agent. It is only when a complaint has been made and the proposed redress scheme comes into effect that the consumer will know about that person. The person can simply fold the business up and go off and do another job. I do not believe that that is helping the consumer. It puts him in a far worse position than he is in now. I really hope that the Minister will look at this issue very seriously between now and another stage. It is vital. The biggest transaction of most people’s lives will be to buy and sell. They need to have utter confidence that the team acting for them is of the best quality and the highest standards. At the moment, it cannot be argued that that is the case, and it certainly cannot be the case in the future because the Bill does not help them. I beg to move.
The noble Earl, Lord Caithness, has spoken to his amendment reasonably, modestly and with humour, but I do not agree with it. I express a great deal of doubt about it. As I understand it, the view of the then Labour Government in 1979 at the time of the Estate Agents Act and, indeed, of the following Conservative Government, was in essence that no regulations under Section 22 of the Act should be made until a need for standards of competence was demonstrated for the estate-agency world.
There was concern then, and there should still be concern today, that competition in the field of acting as an agent for the selling of residential property would be unnecessarily inhibited if standards and qualifications were specified, and there would invariably be a tendency, promoted by existing estate agents, especially those like the noble Earl with professional qualifications, to push for more exacting standards than are necessary or desirable in the relatively simple act of acting as an agent for the sale of residential property.
It is not at all obvious, and the noble Earl has not indicated, what the minimum standards are that are necessary or desirable for an estate agent to have when handling a typical private house purchase. It seems clear, but the noble Earl did not indicate whether it is clear to him, that it would be well over the top to require the standards of a qualified surveyor or valuer with the six years’ training which the noble Earl went through. If it is not to be the high standards of a qualified surveyor, it is hardly worth laying down a few basic requirements of competence. Proposals for training, examinations and long periods of apprenticeship are often promoted by existing practitioners in particular occupations for new people coming into that field. We should appreciate that the interests of existing practitioners and the interests of the public do not necessarily coincide.
I recall an example given by the great economist Milton Friedman—he was usually regarded as a Conservative economist—of a proposal that all newly established barbers in a particular state in the United States should be required to undergo 1,000 hours of training in the theory of hair before they were allowed to wield any scissors on customers. This proposal came not from consumers concerned about the competence of barbers but from existing barbers who would have been only too delighted if competition were restricted.
I do not think the noble Earl admitted or recognised the fact that most complaints about estate agents, nowadays and in the past, are not about incompetence but about malpractice and a lack of integrity in advancing their own interests instead of those of the clients for whom they are supposed to act and keep in the forefront of their minds. Such matters should be dealt with by the negative licensing powers of the Office of Fair Trading to strike off estate agents from acting in that world, and by the ombudsman schemes that exist in practice at the moment or that might exist in statutory form under the Bill.
I doubt the desirability of the amendment. I would be interested to hear from the noble Earl and the Minister what these minimum standards would be and how we can ensure that they are not raised regularly from time to time to suit not the interests of the public but those of estate agents.
I thank my noble friend Lord Caithness for his amendment and for the contribution to the debate of his great experience in the industry. As the noble Lord, Lord Borrie, said, he spoke briefly, he spoke well, and he spoke with humour. There is an awful lot of passion behind what he has said today and his arguments have great value. However, we are not yet convinced that a decision to license the industry can be made easily after one debate. I await the Minister’s response with great interest and look forward to debating the matter further, as I expect we shall on Report.
I recognise the strength of feeling on this issue and I thank the noble Earl, Lord Caithness, for his passionate, knowledgeable and thoughtful contribution. He has, of course, a great deal of experience in this field, which I am sure noble Lords appreciated even more when he moved his amendment. However, let me try to explain the Government’s position on this important subject.
The noble Earl referred to the Legal Services Bill. Of course, I am not dealing with that Bill, but my understanding is that it will not regulate estate agents as estate agents but as a part of alternative business structures, including lawyers. Nevertheless, I acknowledge that he made an interesting point. I will look into the matter further and write to him about it.
Although Section 22 of the 1979 Act enables the Secretary of State to introduce regulations to require estate agents to meet minimum standards of competence before they can engage in estate agency, the section has never been implemented. It would be made more complicated by accepting the amendment.
The OFT report published in 2004 followed a thorough two-year study of the market. The OFT considered whether positive licensing was necessary and concluded that it would not deal with the main identified causes of serious problems in this market. The Government share this view. The agent’s role as an intermediary and salesman would not normally require qualifications by law.
There is little documented evidence that agents who have been banned would have been unable to obtain those qualifications if required to do so. The OFT found that in most cases where estate agents committed acts of serious misconduct that led to them being banned, the misconduct appeared to result from a lack of integrity by individuals rather than a lack of qualifications or knowledge of the law. Nor are qualifications a bar to dishonest practices in any profession; we can all think of many examples of professional misconduct in a number of professions.
One or two interesting studies have been done. The OFT did a market study and found that in other jurisdictions where qualifications or licences were required for an estate agent to work, consumers experienced similar problems to those experienced in the UK. The OFT study found that most problems occurred through a lack of integrity rather than through any lack of knowledge or qualifications. Most estate agents who have been banned in recent years had no previous history of criminality, so would have been unlikely to have been screened out through any process that could have been introduced, whether through training or a series of qualifications. An example that has been given is the issue of a driving licence to someone. There is no guarantee that that person will not commit an offence or speed.
I agree with a lot of what my noble friend Lord Borrie said. He gave us a brilliant exposition of minimum standards of competence. I agree that minimum standards of competence could restrict competition. That is at least arguable. You would therefore be creating a more or less exclusive club. That may raise prices in the market and restrict those in the profession, thereby almost creating a rather expensive closed shop, which is not to the benefit of consumers. So it is arguable, and at least debatable, that if you introduced minimum standards of competence, you would reduce competition and therefore adversely affect the benefits that consumers receive from downward pressure on prices, which reflects the ease with which estate agents can currently set up and enter the market.
Of course, most good estate agents offer proper training schemes for their employees, so there are already estate agents who operate to proper professional standards. The issue is how you deal with the bad apples and the best way of dealing with them. It is debatable whether that should be through qualifications or, as we are suggesting, through a redress scheme that deals with the problems that arise.
Based on considered evidence, the benefits to consumers from introducing compulsory qualifications are, in the Government’s view, unproven. There would, however, be costs. The industry bodies are keen to control standards themselves. This might be a cheap option for government but, as I have indicated, it will be the consumers who ultimately pay the price of allowing those bodies to control access to their industry. Some consumer groups advocate setting up a new independent regulator, which would be even more costly.
I recognise the strength of feeling in the Grand Committee about this issue, but it is the job of government to weigh up the costs and benefits of all the options objectively using the evidence available. I have given some examples of that. As the regulatory impact assessment shows, any benefit from introducing mandatory qualifications for estate agents cannot currently be justified by the costs.
The Bill will improve the current negative licensing system and require agents to join approved redress schemes. We believe that this is a more effective way of dealing with the significant problems in the industry without unnecessarily driving up costs to consumers.
I fully expected the speech of the noble Lord, Lord Borrie. He and I have discussed this matter at various times and in various places around the House and in the Chamber. Indeed, he took a different view from me on the matter of the home information pack. It looks as though my view and not that of the noble Lord is winning at the moment, but we shall wait and see what happens in time. Things might change, and I hope that the noble Lord, Lord Borrie, will agree with me that the surveyor’s element of the home information pack was perhaps not the brightest of the Government’s ideas in the past couple of years. The noble Lord said this was a wonderful thing and would be undertaken by highly qualified people to increase standards and make them more exacting. That is absolutely not what I am after; I am not saying that everyone should be a surveyor to be an agent. I believe that every estate agent should be a member of an approved body, which is totally different. That is a low level of regulation that will not add to the cost, to which both the noble Lord, Lord Borrie, and the Minister referred.
What I found interesting about the speeches of both noble Lords is that if that is their attitude and belief, why have we got regulation for the financial market, for lawyers, for surveyors, and for everyone else? What is the point of it? You cannot say, “This is applicable to those sets of professionals, but we are not going to touch these dreadful estate agents. There is no justification for it. It will ramp up costs and will be a closed shop”. What do you think the lawyers are if not a closed shop? They are far worse than estate agents.
I am not saying that we want to bring the level up to a full surveyor standard. Indeed, I had to retrain to become a house surveyor under the home information pack scheme. To me, that is as important a job, or would have been had the Government not decided not to implement it—I hope there are not too many “nots” in the middle of that sentence—as that of the person who handles the transaction for and on behalf of the client as an estate agent. That is the person who needs to belong to some organisation, because it is the peer-group pressure within that organisation that will help to raise standards and give the consumer confidence.
I am grateful to the Minister for his reply, which I shall read with care. He said that integrity, not lack of knowledge, is the cause of complaints. Was it not integrity in the City that caused the problems? Was it not the integrity of the lawyers? One has only to read the history of Brougham Hall—a book has been published about that—to see how the lawyers and the accountants behaved then. They may be members of approved bodies, but that does not stop there being a lack of integrity in such firms. Sadly, you will never stop a lack of integrity—I wish one could—because it is part of human nature.
I really believe it is necessary for agents to be members of an organisation. The National Association of Estate Agents has set up a code that is not as high a standard as the one needed to become a surveyor, but it is a recognised code and a set of standards of which the noble Lord, Lord Borrie, would approve. I do not want to go any higher than that. I do not want to ratchet it up or to cause expense, because organisations such as the Royal Institution of Chartered Surveyors and the National Association of Estate Agents already exist and are ready to do the job.
I hope that the Minister will be able to spare some time between now and the next stage so that we can get together to see if we can find some common ground. Although I understand his arguments, if they apply to agents, they should apply to the rest of them. We ought to take away all the consumer confidence that we have built up by having this regulation for the other bodies.
I return to the case of my daughter. Why does she have to go through all these financial service exams? Is that not a closed shop? Is that not exactly what the Minister is arguing that we should not have with estate agencies? I am grateful for the Minister’s very full response and for the tepid support of my noble friend Lady Wilcox. I have absolutely no doubt that it will come to the boil by the next stage. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
123A: Before Clause 52, insert the following new Clause—
(1) Section 1 of the Estate Agents Act 1979 (c. 38) (estate agency work) is amended as follows.
(2) In subsection (1) after “land” insert “or who wishes to let, rent or manage residential property”.
(3) In subsection (1)(a), after “such an interest” insert “or manage, rent or, as the case may be, let such a residential interest”.
(4) In subsection (1)(b), after “of that interest” insert “or the management, letting or, as the case may be, renting of that residential interest”.
The noble Earl said: The proposals for estate agencies are to be brought in by amending the Estate Agents Act 1979, but that Act came into force in a very different climate from the one today. The Act related entirely to the buying and selling of properties. Since then a huge new market, the lettings market, has developed. The Act fails to legislate on the residential letting market and that of residential property management.
The National Association of Estate Agents, the UK’s leading professional body for estate agency personnel, receives approximately 13,000 queries a year, of which a good majority are to do with residential lettings rather than sales. The vast majority of the complaints made to the association are about lettings. The residential lettings market sees a much higher turnover than residential sales so there is more opportunity for things to go wrong. The Bill ignores this end of the market, which is perhaps in just as great need of regulation as estate agents. My amendment aims to change the definition of an estate agent in the Estate Agents Act to include the residential lettings and management markets.
I know the Minister will say that things have improved and that we are to have tenancy deposit schemes, but we need to look a little deeper than that. The lettings market has become very big business. I believe that something like £130 billion has been involved in the market since 2000, but less than 40 per cent of letting agents belong to any professional body. So, again, the poor consumer has no standards to go by and can have no possible confidence in a letting agent because they have no idea whether the person has qualifications or belongs to an organisation. Again, to pre-empt what the noble Lord, Lord Borrie, will say, the RICS, the National Association of Estate Agents and the Association of Residential Letting Agents all want the amendment and support me on it. It is not a closed-shop argument; it is to try to get a basis into the market that provides increased consumer confidence. I beg to move.
The amendments in my name in this group fall into two categories. I shall address Amendment No. 128 first, which would ensure that an order made to establish an estate agent redress scheme under new Section 23A, to be added to the 1979 Act, would be subject to the affirmative procedure. I have listened with interest to my noble friend the Earl of Caithness on his amendment, and I will listen with equal interest to the rationale behind the amendments tabled by the noble Lord, Lord Dubs, on penalty notices.
An order made under new Section 23A provides for exemptions from the redress scheme to be made. It allows for specified descriptions of work to be exempted from the scheme and for the duty not to apply to complaints of any specified description, which may also include reference to a description of a person making a complaint. The order may also exclude certain service providers from joining the scheme. I imagine that could include property developers under the provisions of subsection (2)(a).
Buying a house is for most people the greatest financial transaction they make in their lifetime; it is certainly one of the greatest transactions in an emotional and logistical sense. Just because an individual has purchased a property through a developer, there is no reason why he or she should not enjoy the same protection as if they had gone elsewhere.
The statutory recognition of redress in estate agency is one of the most important measures the Bill will introduce. Yet, as with so much legislation before your Lordships, this central function has been relegated to secondary legislation. The crux of this matter is that the redress scheme should not only be independent, but be seen to be independent. Surveys in Which? have shown that 72 per cent of people believe that estate agents invent offers, while 74 per cent think that estate agents and property developers work together in a dishonest way for their own benefit. Those figures come from an online survey and are a useful insight into the general perception of the way the industry functions.
I am confident that there is already very good practice within the estate agency market. Unfortunately, though, there is also a good deal of uncertainty over where to go to receive a good service. Without the positive and public approval of a redress scheme, it will be difficult to instil public confidence in the new provisions. What is more, if many of these schemes do not adhere to one set of standards, there will be very little faith in the redress schemes being set up.
That brings me to Amendments Nos. 134, 135 and 136. Amendment No. 135 seeks to ensure that there will be one code of practice behind the redress schemes. Amendment No. 134 seeks to ensure that a code of practice has to be approved by the Office of Fair Trading in accordance with the categories prescribed in sub-paragraphs (2) to (8) of the new Schedule. With regard to those categories, I believe that there may be some scope for improvement. It is essential to achieve transparency within the scheme, ensuring that clear reasons are given for decisions and that there is monitoring of consumer satisfaction—for example, the analysis of complaints—as well as good communication of information on how the scheme works.
I would also be grateful to the Minister if he could shed light on the issue of option contracts. These contain terms not normally found in traditional estate agency contracts. Based on complaints from the OFT, it is clear that consumers are sometimes unaware of the potential implications of such contracts. They allow a property developer to offer the seller a certain guaranteed price for a property, thereby making a profit from the margin they secure when the market fluctuates. In a recent report, the OFT called for consumers to be given the same protection in law for those who employ businesses using option contracts as those who employ traditional estate agents. I should be interested if the Minister could inform noble Lords whether that area will be included as of necessity in the redress schemes.
The new schedule currently allows for the scheme to have voluntary jurisdiction over other areas of the property industry, which could allow complaints about lettings and surveyors to be dealt with under the scheme. I would be grateful if the Minister could inform noble Lords whether he expects schemes to extend to the areas I have outlined and what accountability the OFT will have in enforcing the provisions of the redress scheme. Does the Minister expect there to be a majority of consumer representation on governing bodies of redress schemes?
Amendment No. 136 simply replaces the duty for the OFT to consider,
“generally accepted principles of good practice”
in relation to consumer redress schemes with considering best practice when deciding which scheme to adopt. It is a probing amendment, following on from Amendment No. 134, with a view to ensuring high standards in the forthcoming schemes.
I await the Minister’s views on these points with great interest. In the light of the evidence collated by Which?, and with the interests of consumers at stake, I remain convinced that the order to establish a redress scheme should be subject to proper scrutiny and promoted to an order subject to positive resolution. I say again that this is a lot of amendments grouped together. I am quite sure, given the speed at which the people behind him are moving, that he will receive a few notes, but if there are some that he cannot get in time, I hope he will write to me.
I declare a couple of interests. The first is that I introduced a Bill on estate agents in the last Session. Had the Government seen themselves able to accept that Bill, we would not be sitting here now. We would have finished with the subject. The other is that I am in the process of trying to sell a house and buy another property. I could tell noble Lords a little more about estate agents than they might perhaps be aware of, but I will not take up the Committee’s time in going into anecdotes about estate agents—except to say that I feel pretty well informed about practices, both good and exemplary and not so good or exemplary.
I appreciate that this is the Minister’s first Bill on assuming office. I wish him good luck with it and thank him for being so approachable on the whole issue of estate agents. I have had two conversations with him and have found him very open to discussion. He did not agree with me, but he is open to talking about the topic. I appreciate his willingness to engage in discussion and to be helpful to Members of this Committee.
I support Amendment No. 123A, moved by the noble Earl, Lord Caithness. It is right that the legislation should cover an area of activity by estate agents that gives rise to more complaints than sales. It would give people who are quite vulnerable in relation to letting properties or management issues some security and safeguards. I hope the Government will consider adopting an amendment along the same lines.
My noble friend Lord Borrie said earlier that some wishes to regulate by members of an industry were a measure to prevent competition. I do not want to get into the argument about the last amendment, but shall simply say this: on the issue covered by Amendment No. 123A, all the bodies in the industry seem to want this type of safeguard. It is a safeguard that should bite on all of them. It is not a matter of saying, “Keep others out”, but of saying, “We are willing to submit ourselves to further provisions to protect the consumer”. My noble friend nods in agreement. I would argue, therefore, that while most industries complain about being over-regulated, here is an industry that is represented by a number of bodies, all of whom want this approach. That is quite interesting and I hope it is persuasive to the Government.
I turn to the two amendments standing in my name. Amendment No. 133 seeks to increase from six to 12 months the period during which an enforcement or penalty charge notice might be applied against an estate agent who has not registered. Six months might be quite a short period in which to get the necessary evidence. Sometimes it might be possible to take enforcement action within weeks. No one is saying it is a minimum period.
I am worried that six months might be too short. To achieve the purposes of this part of the Bill, 12 months would not mean departing from what the Government are setting out to do, but might make it a bit more effective. It would certainly give trading standards a little more time to gather evidence. I can appreciate, particularly in view of my dealings with estate agents in the past little while, that this is a complicated area and that it can take trading standards some time to get the evidence necessary to enforce a penalty charge notice. I hope the Government will see their way to considering extending the period from six to 12 months.
Similarly, Amendment No. 138 attempts to increase the amount of money an estate agent can be fined or penalised for not being a member of a redress scheme from £500 to £1,000. In the grand scheme of things, even £1,000 is a pretty small sum. If we take the average price of a house to be about £150,000—for heaven’s sake, I do not believe that is right; someone gave me that figure, but it is far more than that—then on a normal estate agent’s commission, that means an estate agent gets about £3,000. I hope my arithmetic is right. If we then move to house prices in the more expensive areas, we will find estate agents’ commissions of £10,000 or even more. Set against those kinds of sums, even £1,000 is pretty small beer. Five hundred pounds is in danger of being so small that it seems a trivial amount; so trivial that people will say, “We can absorb this”. I hope the Minister will give us some comfort regarding this. Actually, I think even £1,000 is too low, but I do not want to get into an argument with myself in front of the Committee—not that arguing with oneself in front of the Committee is that unusual, but I do not intend to embark upon that here and now.
What happens if someone is in breach? Can the trading standards office levy repeat fines on a non-complying estate agent? In other words, if an estate agent is liable for one of these notices and the fine is only £500, could the trading standards people repeat the process? That is not very satisfactory, though; it is better to levy a fine at a decent level once and for all.
Could these notices be issued per instruction taken by an estate agent, rather than only per property sold? That is because estate agents take instruction on many more occasions than individual properties get sold. I do not know that, but I am told it is the case. Maybe it would be an additional safeguard if the Minister were to move somewhat in that direction.
I believe that Amendments No. 133 and 138 are fairly minor matters in the scheme of things, but they would certainly help to improve the whole process. Obviously, they are here as probing amendments, and I am anxious to hear what the Minister has to say.
I support my noble friend Lady Wilcox, and in particular her Amendments Nos. 128, 134, 135 and 136. I declare an interest as chairman and chief executive of an insurance broking and independent financial advisers’ organisation. I have lectured and written on insurance and financial services subjects. I have also been involved with the arrangement of mortgages and have dealt with estate agents. With regard to my own business, both the financial services and the general insurance activities are authorised and regulated by the Financial Services Authority. That encompasses not only licensing, but procedures relating to redress and dispute resolution.
I broadly welcome the Consumers, Estate Agents and Redress Bill. Buying or selling a property is likely to be the most significant transaction in most people’s lives, and can involve a great deal of stress and anxiety. In view of that, the consumer needs assurance that the market is transparent. Estate agents play a critical role in the housing market, with over 90 per cent of people buying and selling a house through them.
I believe that most estate agents are honest, although sadly a few rogue agents give the rest a bad name. It is vital for the good of the industry that there is seen to be a code of practice behind any redress system approved by the Office of Fair Trading, which ensures universal high standards and encourages transparent and effective practice within the industry. It also needs to send a clear message to the small number of estate agents who do not live up to our highest expectations.
Professionalism, the raising of standards and the need to protect consumers are matters vital to estate agency. It has been seen by some as a slightly shoddy profession on occasions, because of a lack of a single set of standards. I welcome the compulsion for all agents to belong to a redress scheme, but concur with my noble friend that there needs to be a clear set of standards that all schemes adhere to. There is a voluntary ombudsman scheme for estate agents, the Ombudsman for Estate Agents, but only about 66 per cent of estate agents are members. If an agent does not belong to the scheme, the only remedy currently available to a consumer is to seek compensation through the courts, which is, of course, expensive and time consuming.
The single code of practice should help to give the profession a better image. Research by Which? in June 2006 showed that over eight in 10 people think the Government should set up an independent body to deal with complaints about estate agents, while in March 2004 an Office of Fair Trading report found that one-quarter of sellers were dissatisfied with the service provided by their estate agents. Some 21 per cent of sellers and 23 per cent of buyers said they had experienced a serious problem with their agent, such as failure to pass on offers, suggesting that a buyer would be more likely to be successful if they also used the financial services offered by the agent, and failure by the agent to declare a personal interest. Of those, 71 per cent of sellers and 55 per cent of buyers complained. In the majority of cases, nothing happened or the complaint was not resolved satisfactorily.
Consumer dissatisfaction with estate agents is increasing. In 2005 the OEA received 6,021 complaints—a 35 per cent increase on the number received in 2000. That represents about one complaint for every four estate agents. That, surely, would suggest that a single system of redress should cover all estate agents, should be seen to set high best practice standards and should be seen to have real teeth.
I shall speak to Amendment No. 123A, tabled by the noble Earl, Lord Caithness, the amendments to Schedule 6 tabled by the noble Baroness, Lady Wilcox, and the noble Lord, Lord De Mauley, and the two amendments tabled by my noble friend Lord Dubs.
The first amendment seeks to extend Section 1 of the Estate Agents Act to cover lettings work. As noble Lords are aware, the provisions in the Bill are based on the OFT’s report on the estate agency market. The report did not look at lettings, rentals and property management, and hence does not provide an evidence base for extending redress to those sectors. In addition, the provisions amend the Estate Agents Act 1979 which applies only to those engaged in estate agency work. This is a defined term in the Act that does not extend to lettings work, rentals or property management. The Act would require a major overhaul to be fit for purpose to apply to agents engaged in lettings work and so on, and that is not the purpose of the current Bill.
However, the Government have already taken steps to improve the regulation of the lettings sector. The Tenancy Deposit Protection Scheme, which will start on 6 April 2007, will require landlords of assured shorthold tenancies—the most common form of new tenancy—who take deposits to join a statutory tenants deposit scheme. Deposits will be safeguarded and tenants who keep their property in good condition will be entitled to get their deposits back. The scheme also provides independent mediation when disputes arise. It applies equally to agents doing lettings work where they take deposits on behalf of landlords. This will address one of the major causes of dispute in the lettings sector. I can assure noble Lords that the Government will continue to monitor the operation of the private rented sector and the property sector more generally to determine whether there is a market failure which should be addressed by future legislation.
I turn now to the drafting amendments proposed by the noble Baroness, Lady Wilcox, and the noble Lord, Lord De Mauley. The first amendment seeks to make the power to make an order to require estate agents to belong to a redress scheme subject to the affirmative resolution procedure. I should like to reassure noble Lords about the content of this order. The policy intention is for the order to apply to all those engaged in estate agency work in the UK in connection with buying and selling residential property. There is no intention to apply this only to a narrow subsection of estate agents or types of complaint. The drafting of the new clause proposed in Amendment No. 123A simply gives the same flexibility as the Housing Act 2004 to deal with scope issues which may arise in the future. Subsection (3) gives essential flexibility to exclude frivolous or vexatious complaints, and to exclude complaints from commercial organisations buying residential property, as the policy intention of the redress provisions is to cover private individuals buying a home. On that basis we do not expect the order to contain anything controversial, and I am happy to reassure noble Lords on this point.
If noble Lords disagree, the negative resolution procedure does of course allow the order to be debated if that is considered necessary. The Delegated Powers and Regulatory Reform Committee was content for the order to be subject to the negative procedure. In addition, making it subject to the affirmative procedure would make it out of step with the redress order under Part 2 of the Bill and with the Housing Act. There are good reasons to use the negative procedure here as it will give estate agents much more certainty about when the order will come into force. I hope that noble Lords will agree that it is helpful if those in the industry have a good idea of the timescale in which they must join a redress scheme. As both of the opposition parties have signalled their agreement to the principle of all estate agents dealing in residential property to be required to belong to a redress scheme, I hope that I have been able to give a reassurance on this point.
Amendment No. 134 seeks to amend paragraph (1) of new Schedule 3. It states that:
“A redress scheme may be approved … by the OFT acting in accordance with paragraphs 2 to 8”.
The purpose of these provisions as drafted is to confer a power on the OFT to approve schemes and to ensure that the OFT acts in accordance with the criteria listed in sub-paragraphs (2) to (8) when doing so. It is appropriate that only a power is conferred since, for example, the criteria listed in sub-paragraphs (2) to (8) are not satisfied or if the OFT feels that a further redress scheme, even one that met the other criteria, would cause confusion for consumers and/or estate agents. The office feels that it must be able to refuse to grant approval.
On Amendment No. 135, the drafting of a code of practice was deliberate. The code was mentioned by the noble Lord, Lord Sheikh. There may be more than one code of practice which the ombudsman may use as the basis for complaints against estate agents. I am sure noble Lords would agree that it is right to retain the ability of an ombudsman to refer to more than one code of practice. There is the issue of best practice, rather than good practice. For the reasons that I outlined in our earlier discussion, I would be happy to consider this amendment further to see whether we can adopt it.
Amendments Nos. 133 and 138, tabled by my noble friend Lord Dubs, who has considerable expertise in this area and who was a pioneer in previously sponsoring the Private Member’s Bill, the Estate Agents (Independent Redress Schemes) Bill, seek to strengthen the penalty charge arrangements in one of their applications. I applaud my noble friend’s intent. However, the rationale behind a penalty charge notice is to give an immediate punishment and an incentive to comply with the duty to belong to a redress scheme. Perhaps I may elaborate: there is a six-month time limit for issuing penalty charge notices, as enforcers need to take prompt action within a reasonable timescale. The point of the six-month period is that the penalty charge can be issued within that six month period, or in the case of a continuing breach, on the last day of that breach being committed. The six-month period is to encourage prompt action against any estate agents who are acting improperly. The current view of the Government is that a 12-month period would perhaps encourage a delay in taking effective action. However, the six-month rule does not mean that action cannot be taken later—it can be. My noble friend also asked whether those penalty charges could be imposed more than once. Yes they can, and there is the ultimate sanction of the estate agent being banned. That is why we currently feel that the six-month period is about right.
The amount of the fine needs to strike a balance between being a significant sum and recognising that it can be imposed on the spot with very little due process involved. If the sum was much larger, we would have to consider whether it would be more appropriate for the penalty to be linked to a criminal offence enforced through the magistrates’ court. Furthermore, the ultimate penalty for not being a member is a heavy sanction—being banned from being an estate agent.
The other point is that the size of the penalty charge and the length of time are both consistent with the Housing Act and strike the right balance; but it is of course a matter of judgment. I should also point out that the penalty charge regime related to information pack redress under the Housing Act 2004 is drawn up in similar terms.
I am grateful to the Minister for his reply, not only to my amendment, but to all the other strange amendments grouped with mine, but which have no relevance to it at all. We will not allow that to happen at Report. We will concentrate on the subject that we are trying to talk about, instead of wandering around this rather peculiar Bill.
I am grateful for the support of my noble friend Lady Wilcox. As I said, she was going to come to the boil and she started to come nicely. We will expect more at Report and I, too, support her amendments. The noble Lord, Lord Dubs, is absolutely right; he knows more about estate agents than even I do as a consultant to them. I felt that there was much merit in his amendments. When it came to the matter of the fine, the Minister suggested that £500 was significant to an estate agent. Even with the sort of figures that the noble Lord, Lord Dubs, is talking about, let alone for someone who is selling a property in central London, that would hardly fill up the tank of petrol of one of their Chelsea tractors. My noble friend made some very useful points that were equally applicable to my Amendment No. 123, which we will come back to.
I have to say to the Minister that I was very saddened by what he said. He said that the report of the Office of Fair Trading, on which this part of the Bill is based, did not look at residential letting or management and that updating the 1979 Act in this respect is not the purpose of the Bill. The purpose of the Bill is the protection of the consumer. I could not care less whether it updates the 1979, the 1981 or the 1953 Act; it is for the protection of the consumer. That is what we are not doing. The whole purpose of my Amendment No. 123 is to give the consumer greater protection. If it means updating part of the 1979 Act and that is not at the moment the Government’s intention, so be it as far as I am concerned. I am grateful to the Minister for the rest of his reply. It was just that bit of wording that got to me. His officials took their eye slightly off what we are trying to do with the Bill, which is to give consumer protection.
We will undoubtedly return to Amendments Nos. 123 and 123A. The noble Lord, Lord Dubs, must not give up at this stage. I have every confidence that he will be back batting. I look forward to Report stage. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Committee stands adjourned until Wednesday 10 January at 3.45 pm.
The Committee adjourned at 7.31 pm.