Motion to Take Note
My Lords, the Commission’s proposal for a consumer rights directive, published just over a year ago, on 8 October 2008, marked the culmination of the review of existing consumer law known as the “consumer acquis”. The aim of the review was to simplify and complete the existing regulatory framework, providing a real business-to-consumer internal market.
Sub-Committee G of the House of Lords EU Select Committee examined the proposal and had a number of aims. First, we sought to establish whether witnesses accepted the Commission’s justification for the legislation. Secondly, we considered whether full harmonisation would be likely to deliver the desired result. Thirdly, we examined some of the specific policy proposals with a view to assessing their viability. Finally, we sought to highlight some of the issues and tensions that might be considered by decision makers in the months to come.
The Commission had identified a fragmented regulatory framework across the EU, which it said had resulted from the minimum harmonisation basis of the current directives, meaning that the member states could go beyond the minimum level of protection set down by the directives. This, it considered, has given rise to several barriers to cross-border trade, such as high compliance costs for businesses and a lack of consumer confidence in purchasing across borders. It is the Commission’s hope that these problems can be addressed through this proposal and that an increase in cross-border trade will be secured as a result.
While we as a committee agreed that there is a need for action, we considered that the Government should withhold agreement from the proposal as drafted. We remain unconvinced that in its current form it will deliver the desired boost to trade across borders. We are also concerned that it may reduce the overall level of protection currently afforded to consumers. We as a committee are committed to following the progress of this proposal through to a satisfactory conclusion, one that is beneficial both to businesses and to consumers.
During the inquiry, we heard from many interested parties and received a wealth of evidence. We spoke not only with the Minister, Gareth Thomas, but with the European Commissioner for Consumer Affairs, Commissioner Kuneva, as well as representatives from business, consumer organisations and, on a visit to Brussels, several member states. We hope that our report is well timed to influence the UK and EU-level approach to this dossier as the discussions and negotiations progress. We are pleased to be having this debate while consideration of the proposal in Brussels is still at its early stage.
We have recently received the Government’s response to our report and were happy to note that they are largely in accord with what we had to say. In particular, we appreciated the level of detail in the response, and the approach of taking each of our conclusions in turn has been extremely helpful to us in our scrutiny of this proposal.
A particularly strong concern of the Government, echoing that of the committee and many UK witnesses, was about the potential loss of the UK right to reject under the directive. The Government consider that the retention of this right should be secured by including it in the main text of the directive, in line with the committee’s recommendation that these concerns be addressed through an amendment to Article 26 of the directive, perhaps giving a specific time-limited right to reject, such as the 30 days proposed by the Law Commission.
Following the Commission’s response to our report, in which it states that it would support the insertion of a provision in the proposal unequivocally confirming that the UK could retain its right to reject, I should like to ask the Minister whether this would satisfy the UK Government. While we would be pleased to see the retention of this right for the UK, we are concerned that maintaining different rights for different member states will undermine the aim of the proposal to reduce the fragmentation of the regulatory framework and to complete the business-to-consumer internal market. We would like to see the higher level of protection being made to all member states, as was voiced by some of them in a conference on this topic that I attended in Brussels.
One of the committee’s main recommendations in relation to the consumer rights proposal was that further progress should await a more complete impact assessment by the Commission. We recommended that this might usefully include a full analysis of existing consumer protection in all 27 member states; the problems encountered; the differences between the proposal, the existing minimum harmonisation directives and national provisions; better statistics on cross-border trade; and possible interaction with the common frame of reference for contract law. We are pleased that the Commission has now come forward with a comparative table demonstrating the relationship between the directive and current legislation across member states, and an accompanying note of clarification, which is available on its website. However, there needs to be further discussion of the points raised and we will follow this with interest. We would still like to see better statistics on cross-border trade and reiterate our recommendation that the Commission come forward with this information.
We are pleased to note that the Government share our concern about the introduction of a two-year limit on trader liability for faulty goods. As we highlighted in our report, this could be problematic in relation to the purchase of a range of goods which could reasonably be expected to last longer than two years, such as cars and boilers. We note that the Government are negotiating in the council working group to find a solution which protects the interests of UK consumers, an approach which we endorse, though we stress the importance of the fact that changes to the directive are in the best interests of consumers throughout the EU, not just in the UK.
One of our recommendations in relation to the directive was that its scope should be extended to cover digital products which are currently excluded from the draft. It is our view that if it is to be truly future-proof, this proposal must pick up these issues. The specific issues pertaining to the digital era must be addressed in some way. In their response, the Government reported that while they had suggested such an amendment in negotiations they think it unlikely that the scope will be extended in this way. It is clear from further submissions we have received from businesses that this is a complex area, but we are pleased to note that the Commission has recently extended a tender to examine this area and to extend the principles of consumer protection rules that are available for more traditional goods and services.
Similarly, another of our suggestions with regard to scope—namely, that it should extend to contracts for pure services and the service aspects of mixed contracts—is thought unlikely to feature in any revised draft of the directive. Mixed contracts, which contain both goods and services, were of concern to many of our witnesses, who gave examples of mobile phones and the installation of kitchens. Mr Harrie Temmink, a member of the Commissioner's cabinet, recognised that mixed agreements were one of the issues where the directive may need some clarification. We would like to ask the Minister whether there will be any further attempts to secure changes to the scope of the directive along these lines, and how these issues will be addressed if they are not covered by the proposal. They are obviously one of the highest areas of concern for consumers.
In our report we recognised the concerns of the financial services industry about the application of this directive to the sector. I note that the Government have taken up that point in their response, stating that they wish to see financial services fully excluded from the scope of Chapter 3 on distance and off-premises selling, though they support the application of Chapter 5 on unfair contract terms to financial services. Other members of the committee will be following up some of these questions on scope, contract issues and information later in the debate.
While the Government were supportive of much that we had to say, they did not agree with the committee's conclusions and recommendations in total, and it is to some of these points that I will now turn. In our report, we highlighted the existence of other barriers to cross-border trade, apart from the fragmentation of the regulatory framework, and questioned the extent to which the proposal will be able to achieve an increase in cross-border trade without first addressing these points. For example, we consider that language, culture, distance of delivery and the handling of cross-border complaints may also be responsible for the current levels of cross-border retail trade and therefore warrant consideration in the context of the proposal. While the Government agree that divergence in consumer laws across the EU is not the only factor affecting cross-border trade, they do not say whether they are in agreement that other factors should be considered by the Commission. I would therefore like to press the Minister on this point.
Full harmonisation remains the Government's preferred approach to the directive, whereas we concluded that full harmonisation as proposed by the Commission is likely to be politically impossible for member states and the European Parliament to support. Having detected little enthusiasm for abandoning the full harmonisation principle entirely, we suggested that a “differentiated harmonisation” model may be workable, harmonising aspects such as definitions, the right of withdrawal and the provision of information but allowing member states room for manoeuvre in other areas. In our view, such flexibility could facilitate swift responses to future challenges. We would be interested to hear from the Minister whether the Government are confident that the adoption of a full harmonisation approach will not lead to a reduction in rights for consumers and whether they think it will afford member states sufficient flexibility for responding to future challenges.
During the course of our inquiry, substantial concern was expressed about the use of delegated legislative powers—a procedure known as comitology—to amend the lists on unfair contract terms. It was felt that the process could be opaque, excluding stakeholders, and even member states, from considering the full implications of proposals. Like the Commission, we consider that this process ought to be given a chance to prove itself, as it could be a more efficient method of taking these decisions than a full legislative procedure. However, we note that the Government are concerned about whether the use of the comitology procedure is appropriate, and their suggestion that it can be used to make amendments to non-essential elements of a directive. Here, I would like strongly to reiterate the committee's view that the legitimacy of the procedure will be totally dependent on a commitment to full transparency by the Commission and by national Governments, which should include consultation as appropriate. We would appreciate an update from the Minister on the Government’s position on the use of comitology for the purpose of updating the lists of unfair contract terms.
We are encouraged by the Government’s optimism that the negotiation process on this proposal will result in a “much improved directive” that will protect consumers without placing undue burdens on business. We will continue to follow up progress on this proposal to ensure as best we can that this is the case. While we agree that there is a need to update the existing directives, not least because of inconsistencies between them over key definitions and the fragmentation of the business-to-consumer internal market that has resulted from their minimum harmonisation basis, we believe that there is a considerable amount of work still to be done before the draft directive will achieve the aims set out by the Commission, and the expectations of the committee, of giving value to consumers. I beg to move.
My Lords, I congratulate the noble Baroness, Lady Howarth, on the excellence and clarity of her presentation this morning and on chairing the sub-committee in its work over many months. I am largely in agreement with what she said about the objectives of the consumer rights directive. To replace four directives with one and to update, simplify, clarify and improve consumer rights across the European Union would be welcome. How far the aims are achievable, of course, is another matter, as the noble Baroness indicated. The committee concludes that, at the very least, there is a need to remove the confusion of inconsistencies between the existing directives over key definitions. That the same word or phrase should mean different things in different directives is highly inconvenient.
The committee has rightly echoed concerns voiced by a number of witnesses that, in some instances, the directive as it stands may,
“reduce the overall level of protection currently afforded to consumers”.
The committee is surely right to say that the Government should withhold agreement from the directive as currently drafted.
I have been involved with consumer law and improving the rights of consumers for 40 years, particularly during my period as director-general of fair trading from the 1970s to the 1990s. The starting point for reformers in those times was the failure of English common law to recognise that, typically, there was an inequality in bargaining power between the seller and buyer and that the consumer was in need of non-excludable statutory rights to goods of reasonable quality that were fit for their purpose. We in this country broadly achieved those objectives in the 1970s and the years immediately after. As the European Economic Community and then the EU developed, there was a range of reform initiatives, some of them continuing to come from national Governments and others, particularly combating unfair contract terms, coming from the Commission of the European Union.
Unfortunately, as the noble Baroness indicated, one outcome of the present directive, if it were to become law, would be to take away some consumer rights that UK consumers have against the trader. The right to reject faulty goods, provided that the rejection is exercised in a reasonably timely fashion, has existed in our law for more than a century. The directive removes it. The familiar limitation period within which any court action must be commenced has been reduced from six years to two. I declare an interest as honorary vice-president of the Trading Standards Institute. The institute asks why a supplier of double glazing would produce products that could last for 15 years if it knows that liability will exist only for two years. There are other concerns about reduced rights for consumers that the committee has painstakingly set out in its report.
One basic ground on which the committee considers that the Government should withhold agreement to the proposal is that the committee is not convinced that the proposal will deliver the desired boost to trade across national frontiers. I realise that what I am about to say may be more controversial than other things that I have mentioned. Enthusiasts for full harmonisation—I hope that this does not include Her Majesty’s Government—have an unrealistic ambition that a UK consumer should be able to go anywhere in the European Union and shop with as much assurance that their rights will be upheld as if they had bought in their own high street.
However, if for any reason a purchase were unsatisfactory, even if one’s substantive legal rights were happily harmonised across the European Union, the practicalities of pursuing a legal action against a foreign trader make the transaction much more hazardous than one in one’s own high street. Even if your claim for compensation is modest enough for you to use the new and useful European small claims court, enforcement of any judgment will be problematic. My advice to noble Lords, and to consumers in the UK generally, is that if you want goods that originate abroad, rather than buying them yourself, buy them through the filter of a UK retailer. That may be the wiser course.
I recall from my time as a member of the EU Committee a few years ago the benefit obtained from the memoranda of outside organisations and academics. I am delighted that specialists such as Professor Geraint Howells continue to act as advisers to the committee and that others give freely of their time to write. One such academic, writing fairly concisely and thereby probably ensuring a bigger readership than some others who produce evidence to committees, is Professor James Nehf of the Indiana University School of Law. He pointed out that consumer protection laws in the United States have traditionally varied from state to state: they are a state rather than a federal matter. That has resulted in a healthy degree of experimentation, with measures being introduced in one state and others seeing how it goes and then copying or not. There has been a general convergence over time, but consumer protection laws have originated in state laws. Professor Nehf says that differences between state consumer laws have created few obstacles to cross-border transactions in the United States, where experience suggests that full harmonisation in the EU is “neither necessary nor desirable”.
My Lords, I thank the noble Baroness, Lady Howarth, and the members of European Union Sub-Committee G, for their excellent report. It brings to mind the times when I served on Select Committees. I enjoyed it very much and thought that it was some of the best work that is done in this House, quietly and unsung, especially because so little European legislation is scrutinised by another place. Without reports such as this, so much legislation would go through on the nod; we would find ourselves in a bigger mess if we in this House simply accepted what they wanted to do. So I thank the noble Baroness very much for what she has done for the whole country in this report. It is not only directed at your Lordships who are here to speak today about the work that she has done with her committee in bringing this very readable report to us all; it also has to be remembered that it is very nice for consumers to be able to understand what they are reading, and I commend the fact that the report has been written in plain English.
I follow the noble Lord, Lord Borrie, and of course I agree with just about every word that he said. He has given us a masterclass in consumer law, and so he should—after all, he was the director-general of the Office of Fair Trading. When I chaired the National Consumer Council, I ran to him every five minutes to make sure that what I was doing was going to be okay. I am thrilled that I am speaking after and not before him, in case I say something that he thinks is wrong. He has outlined the things that are wrong with the otherwise very good idea of total harmonisation.
I look forward to listening to the noble Lord, Lord Whitty, who is speaking after me. Again, I should have preferred him to speak before me so that I could at least have criticised something that he said. He was chairman of the National Consumer Council, as was I, and he has now transformed it into a huge organisation called Consumer Focus. When I chaired the National Consumer Council, all the countries of the European Union waited for the policy papers that came out of the NCC and they used them as the bedrock for their own consumer ideas and laws. I hope that that will continue and that we do not step back from the best and finish up at the lowest level, which is often what happens if you try to harmonise everything.
The National Consumer Federation, of which I am the president, Which? magazine and all the other consumer organisations that have encouraged me to stand up and speak today are all very concerned. They are particularly worried about the number of step-backs for the UK consumer. This country has the best consumer rights and laws. No other country in the European Union comes anywhere near us. Some of their consumer bodies even include trade union movements so that jobs can be protected. However, this has nothing to do with jobs; it is all to do with the relationship between the trader and the consumer. We are not talking about like for like here. These are not the bodies that we know; they are a very different group.
What we worry about most in relation to step-backs is, for example, the loss of the primary right to reject faulty goods, which is covered in the report, and the six-year limit for claiming for faulty goods, which the directive would cut to two years. These are the sorts of areas about which consumer groups are worried and that is why I am speaking in this debate.
I shall finish by referring to paragraph 39 in the report, which I particularly support and for which I am very grateful. It says that the committee considers,
“that the Government should withhold agreement from the proposal as drafted. We recommend that further progress on the Directive should await a more complete Impact Assessment. We believe that this could usefully include: a full analysis of existing consumer protection in all 27 Member States”.
That is very important because, once you look at what is available, you see that we are not looking at like for like and that to harmonise with some of those countries would be absolute suicide for us as consumers. I thank the committee very much for the report.
My Lords, it is a signal pleasure to follow the noble Baroness, Lady Wilcox, and I absolutely agreed with her when she said at the start of her remarks that the work of Select Committees is very important. I am still a new boy on Sub-Committee G but I find it the most fulfilling part of the week under the steady and wise leadership given genuinely by the noble Baroness, Lady Howarth. The committee works very well and there is a range of experience. You learn a lot and it changes your views on life.
This is the committee’s third report and, again, I pay tribute to the noble Baroness, Lady Howarth. We have covered cross-border care and organ donation, and this is the third significant piece of work. It looks at the changes in gestation which have dramatic effects on ordinary people. The frustration is that no one pays any attention to these things at all. I am sure that this will be a very productive debate but I am also sure that it will be totally ignored by the press, which is intent on fomenting frenzy in the general population across all manner of celebrity-type fronts. However, when it comes to whether there is an automatic right to reject consumer goods that are non-conformable to contract, they are not interested, and that is very disappointing. We can only try harder and I am very pleased to be part of this debate.
I think that there should be a question mark in the report’s title so that it reads “getting it right?”. That is the burden of my remarks. We had some very good consideration from the Government and some feedback from Europe. That is all positive but it does not satisfy me that the job is done yet, so I want to keep hold of that question mark. As a committee, we are keeping it under scrutiny, which I am absolutely sure is the right thing to do.
The analysis is very easy to support. I do not think that anyone would be against looking at simplification of the current set of rules. The current consumer acquis is not fit for purpose, to repeat a much overused phrase. There is no doubt that there is always a question about the European Union competence and whether there is an impingement under subsidiarity. However, I do not think that anyone can complain: this is the internal market and so it is intrinsically part of the Commission’s work. Therefore, the competence is unquestionable.
The goal of increased trade is commendable but I agree with the noble Lord, Lord Borrie, who captured the point rather well. Why on earth would anyone want to do their shopping in Romania when they could go to the high street? Competent retailers, which we all have, seem to be the answer. We think that there is a cross-border flow of trade of something like 6 per cent. That is good and I hope that the figure improves in the not too distant future. However, the question that we need to ask is: at what cost? Again, the noble Lord, Lord Borrie, made an interesting point. I also noticed from the report Professor Nehf’s very interesting evidence about how the United States handles this issue in not dissimilar circumstances. The two environments are not in point entirely but I think that we can draw on the American experience in taking this whole argument forward.
This all threw me back to my early days when I was studying to become a Scots lawyer. I was reminded of Donoghue v Stevenson and snails coming out of bottles.
I can tell who the lawyers are in the House. Indeed, although this is not my opinion, there are some Scots lawyers who think that there are still things coming out of bottles in cafes in Paisley that are dangerous to consumers. I repeat that that is not my view; I think that Paisley is a really nice place.
I looked at the articles and I believe that the argument has moved on, with the Government and the Commission taking it further forward. However, Article 1 uses the word “approximation”. There are always translational issues involved in Europe, and Article 1 drew me up short because the question that we are trying to wrestle with is: how do you approximate consumer protection across 27 nation states? It is not easy.
You do not need to look much beyond Article 5 in the draft directive to see that there are information burdens, particularly for low-value goods. There is a long list of items for which evidence needs to be provided before they pass the test of the directive, and small businesses in particular might find that very onerous.
The key point under Article 26, to which the chairman of the committee referred, concerns the loss of the automatic right of rejection of goods that do not conform to contract. That is true in Scots law, where there would be a material breach. In passing, it occurs to me that the directive does not conflict with anything in Scots law, which has its own body of contract law. I should just like an assurance from the Minister, but perhaps not this morning if the information is not readily available, that there is nothing north of the border that we need to worry about that is different from some of the terms of the article.
As the noble Baroness, Lady Howarth, said, the Law Commission has raised some important objections about loss of existing rights and obscurity of terms. It made a very good point, which is referred to in Article 26. Article 38 refers to unfair terms: black-list items and grey-list items. I do not think the black-list items are any cause for concern because they are, by definition, terms of a contract which would be unfair. On the Annex 2 items we have had evidence from lawyers suggesting that it is simply not possible to determine whether an Annex 2 unfair term is actually unfair unless you look not only at the contract but also at the terms surrounding it and at any other contracts that affect it. In my view, as a simple former provincial Scottish solicitor, it is generically impossible under Annex 2 to claim that Annex 2 is helpful in defining unfair terms.
I absolutely concur with the view of my chairman that comitology is a matter of concern. I was more concerned about this than my other colleagues so I will be watching it with an even sharper eagle eye. I think it is a device. It can cut corners and it can be useful if it is used with a great deal of responsibility. The transparency and the consultation that surround it are essential; otherwise, people will lose confidence in the system as constituted.
Article 42 is the article which worried me the most. I do not think that there is a legal base for inserting penalties into our civil contract law. I do not see it. There are some really worrying sections in Article 42. This is a matter for legal brains that are more developed than mine in this area. I also agree with the noble Lord, Lord Borrie, that we were very lucky to have our special adviser, Geraint Howells, who is an expert in the area. He speaks in English despite being Welsh and he speaks English in a way that I understand, which is even better. We need to look at some of these detailed articles more fully as we continue to hold this under scrutiny.
There is a real danger that existing protection could be lost in this harmonisation operation, as I think Citizens Advice has said to us. I absolutely concur with colleagues who said earlier that there is a lack of a proper research base or impact assessment. The noble Baroness, Lady Wilcox, made the point that there is not a powerful foundation on which to base some of these changes. There is a need to balance and to keep the consumer at the heart of this. Politically, it is impossible for the Government to disregard existing rights and give them away in any casual way. I am sure that the Government would not want to do that but it might happen by accident. You never know when you go into negotiations at the European Commission what the outcome will be.
For me, paragraphs 170 to 173 of Chapter 7—I am looking at the Government Front Bench—are key. They are about sales contracts and what we need to do for minimum protection in that area before we can be confident that this job is being properly done.
There is obviously a long way to go in this argument. We have had evidence that there is some flexibility and some negotiating capacity within the argument that will probably unfold over the next year or year and a half. It is very, very important that we get this right and that we do not give away the game and surrender rights which have been established, as the noble Lord, Lord Borrie, said, for centuries in the negotiation which is about to proceed. I return to the title of the report and I hope that the Government take the time to get it right.
My Lords, as the noble Baroness, Lady Wilcox, has trailed me, I had better start by declaring that I am chair of Consumer Focus. I congratulate the noble Baroness, Lady Howarth, and her committee on the perceptiveness of the report because it closely mirrors the views of the directive not only of my own organisation but also of other British-based consumer organisations and the European consumer organisations, all of which strongly support the line taken in the committee’s report that, in its present form, this is not the appropriate way in which to enhance consumer rights and to lessen business costs. I say that because I am aware of what the Commissioner told the committee and has told the institutions of Europe. Indeed, I have had discussions with her myself. Her aims are quite correct.
We need to review the present regime; we need greater clarity for consumers; we need greater consistency across borders for businesses; and we need to make it easier to operate across borders for those people. However, I also agree with the committee that the differential regulatory framework in 27 countries is not the main reason why people do not shop across borders. There are not only issues of culture, language, access and consumer preference, but also business behaviour. Not only are there significant barriers to small businesses trading across borders, and certainly across more than one border, but there are very large, transnational firms which operate on a European scale and beyond whose marketing tends to be fragmented. They have franchising and distribution networks, which in this digital age ought to give us global access, but if you try to buy insurance in Spain because you believe it is cheaper you are bunged back—whatever the technical term is—into the British website. Some business practices are a greater inhibition to cross-border trade than the regulatory framework.
Nevertheless, a good objective is to aim for better consistency and the aims of the Commissioner were undoubtedly correct. Unfortunately, this directive does not meet those objectives, largely because of the way it has come about. It is more a cobbling together of four existing directives, all of which have their merits and demerits and, even in the form in which they are put in this overall draft directive, there is no consistency of coverage. Some cover services and some do not; some cover financial services and some do not; no consistency of rights is provided; and there is no consistency of remedy and redress between the various areas. The Commission has attempted to make it more consistent but it is still inconsistent between the four pre-existing pillars. The whole aim is to make it easier and to clarify and it does not do that. My conclusion from a study of this is that it makes life less easy for consumers and less easy for business to operate across frontiers.
I am not exactly of the same mind as my predecessor, the noble Baroness, Lady Wilcox, as regards her attitude to harmonisation in general. I think a degree of harmonisation would be useful here. I am not even ideologically opposed to full harmonisation. The problem with full harmonisation in this context is that it is put at far too low a level. Maximisation will actually reduce the consumer rights of citizens within this country and in a number of other countries across the EU. There may be a role for full harmonisation of definitions and therefore partial harmonisation might be possible. In general, I do not think that this is the appropriate approach.
Clearly, the focus of consumers more generally in Britain is concerned with the loss of long-standing rights, such as the right to reject, as the noble Lord, Lord Kirkwood, has just said. There is also the reduction from six years to two years for remedy in many areas of goods which exists in this country and issues such as the right to a refund of money rather than having to accept a repair. Many noble Lords will have seen the evidence from Which?, pointing out that that is particularly acute with cars that go wrong. Do you really want it repaired when one thing has gone wrong and your confidence in the total machine has been seriously shattered? You need to get your money back.
I would probably be even harsher on the references to the proposed unfair contract terms and the role of the British national regulators in that area needs to be preserved. There are dangers that it would be undermined. I also agree with the committee that putting some of this down to comitology, as the noble Lord, Lord Kirkwood, said, is not a reassurance that this will all come right on the night. If the basic legislation is unclear, it is unlikely that comitology will make it a lot clearer.
Another dimension that is not clearly in the draft directive is any adaptation to the digital age. It is mentioned in one or two places, but a lot of consumer access is delivered through the digital world. That must be particularly true when people are at a large distance from the actual provider, but the draft directive does not reflect digital rights and provisions right across the economy. We also agree that the impact assessment and the basic research behind it need to be improved.
My conclusion is that this is a huge missed opportunity. The Commission rightly saw that there was a job to be done. It worked hard to try to do it, but it started from the wrong place. Instead of producing a consistent framework and then adapting the four existing directives into it, it started from the basis of the four different directives. That has led to some of the inconsistencies and possible dangers that the noble Lord, Lord Kirkwood, described. I very much regret that the Commission’s good intentions have been drafted in that way. I doubt very much whether that is a matter for negotiation. It is not a matter of tweaking the structure of the directive; nor is it a matter of negotiating UK opt-outs to preserve the right to reject. There are bits in here that can be preserved but in effect we need to start again. When the new Commission comes in, if it is, as I hope, concerned to improve citizen and consumer rights and to ease the course of business across the EU, it ought to rethink the whole project. The report of the noble Baroness and her committee gives it good grounds so to do.
I know that some of our concerns in this House and in the consumer movement in the UK are shared across other countries within the European Union. Consumer interests and business costs in the long run would be much better served were we effectively to start again. I hope that the Commission, the Council of Ministers and the Parliament will ensure that that is the case, whatever process needs to be gone through to bring that about.
My Lords, some years ago, as a Member of the European Parliament, in the first directly elected Parliament, I was vice-chairman of the Committee on Public Health, Consumer Protection and Environment. That was in the days when the doorstep selling directive was mistakenly thought by some people in this country to be a direct attack on our daily pint of milk delivery on the doorstep, when it was in fact about giving people the chance to change their minds about hire purchase agreements or other financial commitments made to doorstep sellers of financial services—a very necessary consumer right. Many other myths abounded at the time due to the perception that the European Union, or the European Community, as it was then known, was encroaching on our national and sovereign rights and ways of doing things. Even in those days, the House of Lords Select Committee reports were very well regarded and well used not only by British MEPs but by MEPs of other nationalities.
Today, it is with relief that we now have before us a well researched and clear report on the current Commission proposals. I am glad to see from the list of witnesses that at least two Members of the European Parliament were witnesses to the committee, but I am sorry that there do not appear to have been any MEPs from other member states to give their views. Nevertheless, I welcome the ongoing policy dialogue between the Select Committee and the Government, of which this debate forms part, and between the Select Committee and the Commission. That certainly did not happen in my days in the European Parliament.
The present proposals to update and improve the fair application of consumer protection throughout the now much enlarged European Union are well timed, although it is perfectly true that their scope may be a little too great. For the same reasons, Sub-Committee G’s report is well timed. Considerable regard will be paid to the work that has been put into the report. I congratulate the noble Baroness, Lady Howarth, not only on her committee's report but on her clear and detailed presentation of it this morning, which, in a way, leaves very little for the rest of us to add. Although I am not a member of Sub-Committee G, I am a member of Sub-Committee A of the European Union Select Committee.
I have listened with great interest to the various well-informed contributions to the debate and, as I said, feel that I can add little. Like others, I want to record that I welcome the general objective of the proposals before us but, again like others, I have doubts about the possibility of full harmonisation. I hope that the Government will look into the committee's suggestion to differentiate harmonisation. I look forward to hearing the Minister's answer on that proposal, which was put so well by the noble Baroness, Lady Howarth.
I am also concerned that the Commission's proposals do not take into account the impact of new technology in our lives. I cite as an example digital products. I understand that there is some doubt as to whether the directive would adequately deal with the complexities of the digital age. By their very nature, those products are of a very different kind to those of a more tangible quality and are subject to intellectual property rights. May not the digital era require even more far reaching reform than that proposed in the report? This is yet another area where, hopefully, time is on our side. I am also concerned that, as my noble friend Lady Wilcox and others pointed out, the current level of protection should not be reduced. If, as the noble Lord, Lord Kirkwood, thinks, the press will ignore the report—I certainly hope that they do not—that will be very disappointing, but the important thing at this stage is that the Commission takes note.
I fully support the approach that, as proposals are at an early stage, there is ample time to get it right.
My Lords, first, I thank my noble friend Lady Howarth for securing the debate and for her able and patient chairing of and guidance on what is, at least for me, a very complex EU directive. The noble Lord, Lord Kirkwood, said that he wanted to add a question mark after the words “Getting it right”; I had thought of putting three dots, to signify that it is ongoing and that, if we ever get it right, we will be lucky.
I shall address two key issues that came up during the course of the scrutiny process: first, the scope of the directive; and, secondly, the information available to the consumer and its clarity. As with a number of other matters that arose from discussion of the directive, there were various views on what its scope should be. After due consideration of the many concerns that were expressed by several different witnesses and in the written submissions, we felt that the scope could be expanded in a number of ways. We recommend, for example, that the inclusion of other directives, such as the package travel directive within the scope of the consumer rights directive, should be reviewed after the extended impact assessment, which we recommend takes place before the Government agree the proposal as currently drafted.
There was a good deal of agreement on extending the scope of the directive to include digital products; the noble Lord, Lord Whitty, and the noble Baroness, Lady Hooper, have already commented on that. The issue of digital products is very important, and I will spend a little time talking about it. Article 2 of the proposal defines goods as any “tangible, movable item”; thus, digital goods bought over the internet would be included in the proposals, but similar items downloaded directly on to a computer would not be covered. That is very confusing for most consumers.
There was support for an extension of the scope of the proposals even from those who were positive overall about the directive. The British Retail Consortium, for example, expressed strong support for the directive and believed the scope to be satisfactory, but it agrees with the principle of extending the scope to include digital goods provided that it is acknowledged that the remedies for the sale of other types of goods would not necessarily work for digital products. Developing appropriate measures for digital goods in this context will not be easy.
While Consumer Focus, Which?, the OFT, and the EU consumer body umbrella organisation, the BEUC, all felt strongly that digital goods should be covered by the directive, not everyone who submitted evidence supported their inclusion. This was partly due to the difficulty arising from the difference between tangible and non-tangible goods. In its written submission, the CBI argued that digital goods were,
“different in nature and ... subject to intellectual property rights”.
I suggest, however, that this distinction might elude the consumer, who has protection when buying a music CD but not when legally downloading music from the internet; so the inclusion or otherwise of digital products indicates how difficult it is to design instruments that keep pace with present-day situations, let alone with what may arise in the future. It is hard to see how the aim of the directive to future-proof consumer law can be achieved if it cannot engage effectively with today’s realities.
I spent a little time on the scope of the proposals because it was one of the biggest concerns expressed in many of the submissions that we heard and read; “wide”, “unclear” and “very confusing” were some of the terms used to describe the directive. Certainly, many consumers would feel quite bewildered by what is and is not covered by the proposal. Indeed, many of the witnesses and written submissions acknowledged that the clarity of information for consumers and traders was a difficulty when trading in one’s home country, let alone across borders with the potential for language and cultural barriers to be added to the mix. Given the complexities, apparent anomalies and gaps, we will need to work very hard indeed to ensure that, as far as possible, consumers are given the correct amount of information at the right stage of the transaction. As might be expected, the directive itself is not written in accessible language for everyday consumers, but that is not necessarily a problem unless lawyers and those tasked with interpreting and distilling the meaning of the proposals lacked clarity about its provisions. The OFT observed that a directive that was clear and capable of being explained to consumers should be the main goal.
Other key concerns expressed include the possibility of information overload for the consumer, a lack of guidance for traders about how to display and arrange the information for the consumer, possible deterrents to the trader due to the volume and nature of the information, and the consequences of not providing the information. Although we were not convinced by the argument that consumers might suffer from information overload as a result of the directive, we do feel that it is essential for the directive to be legally robust and clear for those who are charged with explaining its provisions to consumers.
In labelling this a consumer rights directive, the aim should be that consumers have a full range of protective measures under the law. Of course there needs to be a sensible balance so that traders are not unnecessarily hampered by excessive regulation and consumer push-back but, after close examination of the draft directive and of the evidence from witnesses, we feel that it is important to stress that consumers need clarity. It is no good having rights if you cannot work out what they are or what is meant by them. This is particularly important in the context of this debate. As we have already said, we came to the critical conclusion that the overall level of protection currently offered to consumers should not be reduced.
My Lords, may I apologise humbly to the chairman of the committee in that I put my name down very late? May I also apologise to the noble Baroness who has just spoken, although no doubt she and other noble Lords will be delighted to hear that I shall be brief? The noble Baroness who has just spoken has made most of the points that I would wish to have made.
It was 32 years ago when I sat where my noble friend Lord Hunt is sitting now and had to lead for the Opposition on the Unfair Contract Terms Bill, which became the Unfair Contract Terms Act 1977. I recall with considerable humility that one was among really eminent lawyers, such as former Lord Chancellors; about four of them spoke. It was relatively simple in those days. The first element that I remember was removing what was known as the small print. The two categories of people concerned were very much the trader, in perhaps white goods or motor cars, and the consumer. No longer could the trader say to the consumer, “It’s in the small print”, if things went wrong. I hope that I have got some of that right. That seemed to be the basis of the 1977 Act, and it seems to have worked quite well.
The noble Lord, Lord Borrie, made, if I might humbly say so, a five-star speech that probed a little further. He pointed out the great risks involved in getting right the consumer legislation across borders. Since I was in any way involved in this in 1977, the list of commodities and things that can be traded has increased. Indeed, one of your Lordships spoke about mobile phones and how one can buy and use them. The problem of looking for and enforcing a right across borders in that aspect is particularly difficult.
I was particularly grateful to see in the report by the noble Baroness, Lady Howarth, what she called the black and the grey lists. Chapter 8 of the report was particularly relevant to any of the things that I might have wanted to say today. Paragraph 181 beautifully put the point about patients wishing to try as yet unproven medicines—I hesitate to call them drugs. Similarly, paragraph 186, on insurance, also merited further consideration, as I think has been suggested both by the noble Lord, Lord Borrie, and indeed the noble Baroness in her report. I was very pleased to see this reiterated in paragraph 194 and in paragraph 195, which stressed national safeguards.
Finally, I was really delighted to hear from the noble Lord, Lord Kirkwood, about the case of Donoghue v Stevenson in 1932. He might be an eminent lawyer, but I am only a humble member of the Institute of Chartered Accountants of Scotland. However, part of my legal training was to take into account fitness for purpose. I seem to recall that that case rested on—if I may say this to your Lordships this early in the morning—a decomposed snail in a bottle of stone ginger. I do not think that this tincture is widely available in the Refreshment Department in your Lordships’ House, but never mind. The case is still quoted and still of particular relevance in Scotland. Indeed, the noble Lord, Lord Kirkwood, pointed out Scots law as far as it is applied throughout the United Kingdom. What he had to say makes the committee and your Lordships think of what might happen across the borders in Europe and the Community.
I am particularly grateful to your Lordships and, above all, to the noble Baroness, Lady Howarth, for her report and for allowing me to speak, and I look forward to hearing what the Minister has to say.
My Lords, I am sure that I speak for everyone in your Lordships' House in thanking the noble Baroness and her committee not only for the quality of this report but also for the fact that they clearly have total unanimity on all sides of the House regarding their conclusion—mind you, we have not heard what the Minister has to say. The fundamental conclusion that,
“the Government should withhold agreement from the proposal as drafted”
also seems to have had unanimous support from all sides of the House.
From my point of view, the two reasons set out in paragraphs 41 and 42 are persuasive. First, I share the view of the committee that, by itself, the action proposed by the Commission—that is, harmonisation of consumer law across the EU—will not necessarily boost cross-border retail trade as the Commission desires. Secondly, and most fundamentally, the committee says that it is,
“of utmost importance that the overall level of protection afforded to consumers should not be reduced”—
a point touched on by a number of speakers. The overarching concern is that that could happen if harmonisation went through in the proposed form.
The noble Baroness, Lady Wilcox, said she thought that we had the best structure of consumer protection in the European Union and I am sure that the noble Lord, Lord Whitty, would agree. I entirely agree that that is the case, but I do not think that we should be complacent about this. One of my fundamental concerns about moving to harmonisation is that a number of people have argued for some time that we need to improve consumer protection rights in the United Kingdom.
My noble friend Lord Kirkwood said that one of the problems with these reports is that they get buried and no one takes any notice of them. Clearly, there is an element of truth in that and one of the reasons is that the arguments are always put in rather dry terms. In the time available to me, I will indicate in practical terms what I mean by saying that there are areas in which we need to improve our consumer protection rights.
For example, not many people in this Chamber will have called any of the helpline numbers at the Department for Work and Pensions. If they did, they will have discovered that they cost 40 pence per minute from a mobile phone. A lot of people do not have BT landlines and have only a mobile phone, so they have to use their mobile when they need to contact the DWP. I do not think that many of your Lordships earn £67.75 a week in incapacity benefit, but if anyone does and they have discovered a mistake in their payment, when phoning the DWP they could find themselves being charged £24 for the privilege of determining the anomaly in their payment.
I am sure that many of your Lordships have had to wait in for the gas man to visit, a satellite dish to be installed, furniture to be delivered or a boiler to be fixed. You would have been told that the man might come in the morning, the afternoon or that he will certainly come at some time during that day. That is particularly difficult when a person is on low income or has inflexible working hours.
I am sure that all your Lordships have picked up a pack of sausages and seen that they are labelled “British”. The expectation will be that they contain pork from pigs which have been raised on British farms. In fact, the meat could come from anywhere and still be labelled “British” as long as it was processed in the UK. Shoppers are often prepared to pay more for meat because they think that it is British, but quite often it will only have been processed here.
When people receive their energy bill from the electricity company, there are thousands of tariffs and all kinds of claims and counterclaims by the energy companies. Unless people are prepared to spend half a day on the internet, it is often impossible to discover exactly what is happening with their energy bill. I will not even go into bank clearing and the fact that your money leaves your account on day 1 and is not received by the person to whom you have paid it for several days.
While we could strongly argue that consumer protection in this country is better than in most of our European competitors and partners, there still needs to be a great improvement before we can agree to significant harmonisation with other member states. From these Benches, we would do three things. We think that the Government should introduce a new universal service code, which would be mandatory in the public sector and would provide a benchmark for the private sector. We would—no one has touched on this—introduce a general duty to trade fairly, which would be enforceable by individuals as a private right, as well as by the relevant authorities in case of infringement. We would take out of the empire of the noble Lord, Lord Mandelson, the responsibility for consumer affairs. We would call on the Government to appoint a Minister with responsibility for consumer affairs in the Cabinet Office, with the right to attend the Cabinet.
We welcome this report. We are glad of the unanimity, subject to what the Minister has to say. But before we move further down the harmonisation route, we need further protection of consumer interest in the UK.
My Lords, first, I draw attention to my interests as set out in the register; in particular I am a partner in the national commercial law firm Beachcroft LLP. This has been a marvellous debate with some outstanding contributions. I always enjoy listening to the noble Lord, Lord Borrie, but I particularly appreciated hearing others refer to his contribution. My noble friend Lord Lyell said that he made a five-star speech and my noble friend Lady Wilcox referred to his masterclass in consumer law. I have never heard so many plaudits. For me, the most interesting part of his speech was the fascinating comparison with the United States, the trade between states and the different systems, which is something for us to think about.
Before I deal with the outstandingly clear speech of the noble Baroness, I should like to say to the noble Lord, Lord Kirkwood, that he must not get cynical. I am very worried about him. When he says that the media will bypass this debate, has he forgotten that this is a televised debate and that the periodicals will scrutinise all that we have said? Is he aware that our website gets millions of hits? There is a fascinating interest in this area. I do not think that his pessimism will be borne out. I certainly hope not.
I was also thrilled with the notable contribution from my noble friend Lady Wilcox. This has been a debate in which the Minister has a lot to answer. So far there has been a general feeling of unanimity across the House. I have a horrible feeling that it may not continue in his contribution and I urge him to throw away the script that he has been given.
I thank the noble Baroness, Lady Howarth, and the other members of the committee for producing this thoughtful report, which is aptly named Getting It Right. That has been the focus of debate. As is ever the case with these reports, some of the Government’s responses to the various recommendations of the committee are more constructive and positive than others. I certainly look forward to hearing more from the Minister about why he does not agree, for example, with the committee’s recommendation, which is supported by many speakers, to pursue differentiated harmonisation, which would allow greater flexibility and potentially much more effective compliance, rather than full harmonisation. I would also be interested to hear more about the ongoing negotiations on this draft directive.
I was a little disillusioned by the noble Lord, Lord Whitty, when he said that it is a missed opportunity and that it is time to start again, and heartened by my noble friend Lady Hooper when she said that there is ample time. I suppose that those of us who have had experience know about that. I remember fondly that I was assisted by my noble friend when between 1992 and 1997 she chaired a committee about the rights of consumers. We had the Citizen’s Charter, and I had the honour to be the Citizen’s Charter Minister. The noble Lord, Lord Razzall, referred to helplines, and my mind went back to when we had the cones hotline—no, it wasn’t me. The Minister at the time said that the telephone number to ring was to be that of the general exchange for the Department for Transport. Hundreds of journalists rang the number only to be told by the operators that they did not know what on earth they were talking about. Our memories are crowded with those sorts of pitfalls.
I was pleased to hear that Ministers are confident that the right to reject will be retained, but I wonder whether the Minister can give us some more reassurances about the other proposed improvements he expects to be successful. Just as important is that he explains what steps he will take to protect the UK’s consumer rights regime should any of his valiant efforts to make improvements fail. The concerns raised, in particular by the noble Baroness, Lady Young of Hornsey, about the bewilderment of people faced with what is proposed and the weakening of the UK regime, have rightly been at the core of this debate, and I hope that the Minister has fully absorbed the committee’s recommendations in this area. Presumably, Ministers have no desire to see the current balance of rights between UK businesses and consumers being eroded. If full harmonisation does take place, how will they be able to prevent that occurring? As the saying goes, “If you touch it, you change it”. Is the policy one of harmonisation followed by gold-plating? If it is, the approach has had, to put it politely, a somewhat chequered history. All laws and regulations have some unintended and unforeseen consequences, but when we are dealing with measures as wide-ranging as these, we must be especially on our guard.
Valid concerns have also been raised about the possible unintended consequences arising from this directive especially for financial services. There appears to be a certain amount of confusion about whether beneficial services such as auto-enrolment into pension schemes with an opt-out will continue to survive. Although I am sure the Minister is going to tell us that this problem has been identified and addressed, that is not the same as seeing the practices protected on the ground. Robust measures must be in place and Ministers should share their plans with us and allow them to be subjected to scrutiny.
It is clear on reading the report and the other various responses to the directive that even where it is benign or beneficial, it does not achieve all that it is supposedly intended to achieve. The responses to the department’s consultation raised the concern that much more could be done to simplify the EU-wide consumer rights regime and consumer sales law. This, as we have heard, is particularly true for digital products, a sector particularly suited to cross-border trade, by the way. Most directives have elements of inbuilt obsolescence, but no more so than in this area because the world changes so rapidly. When one looks at the speed of change over the past few years, one can hardly imagine what things are going to be like over the next few years. This directive has got to come to terms with the digital world rather than exclude it. As the noble Lord, Lord Whitty, said, it is a very different world. The reluctance of the Commission risks making this particular draft directive out of date even before it is implemented, and I am not sure that the Government are doing anything to improve matters. A White Paper setting out the intention to review does not inspire one to believe that the necessary steps will be taken soon.
One area in which the Government can and most certainly should make a difference to UK consumers is in the matter of guidance and information provision. Any simplification of regulation in this directive will have effect only if it is readily and fully understood. I think that the department must take great care to explain precisely what rights and responsibilities will remain, particularly if a harmonised rights regime leads directly, as many noble Lords have expressed in this debate, to an improvement in cross-border trade. What benefit will the directive have if it fails to enhance consumers’ understanding of their rights abroad? We have had several discussions on that topic. How will businesses be encouraged to market their products in other countries if they are not confident about the nature of the regulatory regime under which they will be selling?
Concerns about clear information were not limited to the quality of the guidance produced by the Government. In the report the noble Baroness highlights deep concerns about the quality of the analysis which underpins this directive. The Government’s responses were a little superficial about the costs and the analysis, and the way in which procedures have been followed. I understand that the Commission is undertaking further work on these proposals, but there is no indication of what effect any future analysis will have on the negotiations and the final shape of the directive. I hope that the Minister is going to reassure us that the ongoing work is a meaningful exercise, not merely an attempt to provide a justification for decisions already made.
A true single market for Europe was always an integral part of the founding vision that so many of us shared, but as my noble friend Lady Wilcox has always told me, free trade must also be fair trade. If the noble Lord, Lord Razzall, can produce a clear definition of “fair trade” we will make a lot of progress in the direction that he wants us to go. Competition pursued on the basis of undercutting consumer protection is certainly not fair competition, and effective regulation must be targeted, proportionate and, in this case, should promote trade and not inhibit it. As my noble friend Lady Wilcox said, paragraph 39 of the report is particularly relevant. The whole report is brilliantly written, but paragraph 39 says that,
“we consider that the Government should withhold agreement from the proposal as drafted. We recommend that further progress on the directive should await a more complete impact assessment. We believe this could usefully include”—
how much I agree with this—
“a full analysis of existing consumer protection in all 27 Member States; the problems encountered; the differences between the proposal, the existing minimum harmonisation Directives and national provisions; better statistics on cross-border trade; and possible interaction with the Common Frame of Reference for contract law”.
How true that all is, and I can hardly wait to hear the Minister’s response.
No one wants to see us trapped in a regulatory and legislative logjam, but we need to have transparency and accountability. As several noble Lords have mentioned, the comitology system within the European Union is somewhat controversial; I had quite a lengthy conversation with my noble friend Lord Inglewood, who is out of the country and sadly cannot be with us today, about this whole subject. Comitology has its merits, but transparency must be maintained. I thought also that paragraph 196 was absolutely spot on,
“we consider that this process ought to be given a chance to prove itself as it could be a more efficient method of taking these decisions than a full legislative procedure. Its legitimacy will be dependent on a commitment to full transparency by the Commission and by national governments, which should include consultation as appropriate”.
I do hope the Minister agrees with that.
In conclusion, my overall summary is that I can offer only qualified support for the draft directive. There is a great deal of work still to be done at both EU and national levels before I can feel confident that international trade and consumer rights will both benefit. I look forward to the Minister’s response to the numerous questions and doubts expressed from both this Bench and by Members on all sides of the House who have spoken today. Again I thank the noble Baroness for introducing such an important debate.
My Lords, I thank the noble Baroness, Lady Howarth, profusely for her introductory contribution and the committee for a truly excellent report. I enter the debate with some trepidation. There is always a worry in the back of my mind that there are at least one or two people in the Chamber who know 10 times more than I do. On this occasion, there is a galaxy of people who know a hell of a lot more than I do.
I was fascinated by the suggestion of the noble Lord, Lord Kirkwood, that a question mark should be added to the title of the report and by that of the noble Baroness, Lady Young, who would prefer three dots. Perhaps if we put underneath it “Caveat emptor”—let the buyer beware—that would be good, general, all-round advice whatever happens to harmonisation, full, none at all or differentiated. There was not quite unanimity among noble Lords. My noble friend Lord Borrie suggested that there should be 51 variations on a theme, as per the USA, and my noble friend Lord Whitty wanted us to start again. I am not sure whether that is quite unanimity, but I shall endeavour to address a number of points. I do not know whether I can address all the points made in an excellent and wide-ranging debate, but if I cannot we will communicate in writing.
The committee drew on evidence from stakeholders in both the UK and other member states to produce a thorough and in-depth analysis of the complex issues that the directive raises, including seeking the views of representatives of other Governments. The findings will be of great assistance to the Government as negotiations continue. I mean that genuinely; I think that they are well written, with a great deal of clarity, which is very important.
Noble Lords will be pleased to know that the Government are in agreement with the committee on the vast majority of points. I cannot go quite as far as to follow the advice offered by the noble Lord, Lord Hunt, who suggested that I should throw away my speech and start again, because I do not think I would be capable of dealing with this complex issue without it. We agree that the directive could bring benefits to both consumers and traders but I underline the fact that certain aspects need to be improved.
This is the correct time to be introducing these changes. There have been substantial developments in the market since the four existing directives were adopted—for example, the massive increase in internet sales and the rise of online auctions—and, in order to capitalise on the potential of the internet to boost cross-border trade and provide consumers with greater choice, it is necessary to update the rules to reflect these changes. Full harmonisation of consumer rules has the potential to ensure that consumers will benefit from knowing that, wherever they shop in the EU, the same consumer protections will apply. Making it easier for businesses to sell to consumers in other countries will improve the functioning of the internal market and benefit consumers by giving them access to greater choice and lower prices. Businesses that trade cross-border or are considering doing so in the future will similarly benefit from harmonisation of rules.
The existing divergence of rules creates considerable compliance costs for businesses that sell to consumers in other member states. Despite their best intentions, businesses—particularly small and medium-size enterprises—can find it difficult and expensive to be certain that they are complying with the plethora of consumer provisions that exist across the EU.
Of course, as the committee’s report acknowledges, divergent consumer laws are not the only impediment to increasing cross-border sales. Differences in language, taxation rules and the cost of delivering goods to other countries are also important points, as a number of noble Lords said. But these are not reasons for not tackling the barriers created by fragmentation of consumer rules. The European Commission is undertaking work separately from this directive to tackle some of the other barriers to business-to-consumer cross-border trade. For example, it is engaged in work to consider how consumers can have better access to redress mechanisms in other member states. Yesterday, the Commission published a communication on cross-border e-commerce, which considers how to encourage levels of cross-border online shopping and looks at a number of issues such as cross-border enforcement, payment systems and copyright issues, as well as fragmentation of consumer rules.
However, while the UK strongly supports the objectives of the directive as a simplification and better regulation measure, it is vital that the internal market objectives are not pursued at the expense of important consumer protection. It is clearly a universal concern of the House that we should not get a lowest common denominator effect where consumer protection is diminished. We must work to achieve a directive that provides a high level of consumer protection as well as boosting the internal market. We share the committee’s concerns that the Commission’s proposal for the directive does not adequately achieve these dual objectives; indeed, there is a serious risk that the directive may result in the loss of key consumer protections, both in the UK and in other member states.
I am also concerned that the scope of the directive and its interaction with national contract law and other Community legislation is not sufficiently clear. I am particularly concerned about the potential loss of the UK right to reject faulty goods, the reduction in the period of trader liability and the potential loss of consumer protection in the area of financial services. These points were addressed by a number of noble Lords and it will only be in the interests of time and trying to cover as much as I can if I do not single them out individually.
I say in response to the question from the noble Baroness, Lady Howarth, that the Government’s view is that it is essential that the right to reject faulty goods for a short period is retained. That is a cornerstone of the UK protection regime and is understood and highly valued by consumers. Although we have received assurances from the Commission that we can retain this right in general contract law, we do not regard this as a satisfactory solution. It will not achieve the aims of harmonisation or simplification and is likely to be confusing for both traders and consumers. We are therefore working with the Commission and other member states to secure an amendment to the directive to provide a fully harmonised, time-limited right to reject which will be available to consumers across the EU. I am pleased to say that we are making progress on this issue. We are also working with other member states to ensure that longer liability and limitation periods will be provided by the directive. Two years is simply not enough in relation to certain goods and services.
The noble Baroness, Lady Young, expressed her concern about future-proofing in relation to digital products, services, mixed goods and services contracts. The Government have made it clear that we would like to see these issues covered throughout the directive, including Chapter 4, which provides consumers with rights when things go wrong. Unfortunately, it now seems unlikely that the scope of the directive will be expanded in this way. That is disappointing, but we are pleased that the European Commission is looking at the area of digital products, although its conclusions will not come in time for action through this directive. The UK Government have committed to ensuring that our domestic laws provide adequate and appropriate protections for consumers when they purchase digital products. It is our intention to do this through a consumer rights Bill which will also simplify our existing consumer protection rules on unsatisfactory service provision. We hope that our work will inform the Commission’s thinking on these important issues.
I now turn to the comitology procedure—I thought that this had something to do with astrology before I encountered the directive, but I now know how much in error I would have been—which has exercised a number of noble Lords. The Commission proposes that the procedure should be used to update and amend the list of banned and grey contract terms. The Government have concerns about whether the use of the comitology procedure is appropriate given the importance of these lists. Although the procedure would provide a degree of flexibility to respond to contractual terms that raise the issue of unfairness, there is also a clear risk that it could be opaque and may not adequately take account of the views of national Governments and stakeholders. We know that other member states share the concern expressed in the committee’s report.
We are aware of the strong concerns about the adequacy of the Commission’s impact assessment—a number of noble Lords referred to it. Like the noble Baroness, Lady Howarth, the Government are pleased that the Commission has recently produced a comparative table setting out the impact of the directive on consumer protection in each member state and an accompanying note on important issues such as the scope of the directive, which also concerned noble Lords. We are also pleased that, through its work on the consumer markets scoreboard and on cross-border e-commerce, the Commission is making important progress in gathering additional evidence to support its policy-making.
I shall try to answer some of the points raised. The noble Baroness, Lady Howarth, wanted to probe whether we would support differentiated harmonisation. The UK Government support full harmonisation in principle, but I have already indicated that the directive in its current form does not meet our requirements and we recognise that in some areas full harmonisation may be difficult to achieve. If that is so, we will need to consider alternative solutions such as differentiated harmonisation, but we should aim to find fully harmonised solutions wherever possible. However, we recognise that there are some areas, such as information requirements, where member states need greater flexibility.
The noble Lord, Lord Kirkwood, asked about Article 42 and inserting criminal penalties into civil law contracts. Article 42 has been brought in from existing directives. We do not think that it is the Commission’s intention to apply criminal penalties to breach of contract. We have raised this as an issue and expect some clarification.
The noble Lord asked whether there would be an impact on Scottish law. Most of the directive covers fields where the law of the UK in general is the same. However, there are areas where there are differences between England and Wales and Scotland. The key point relates to the limitation period for contractual disputes. Five years applies in Scotland and six years in England and Wales. We have consulted Scottish stakeholders and the Scottish Executive; the noble Lord, Lord Kirkwood, will be pleased to learn that we regularly talk with them.
One of the nuggets of this debate was definitely Donoghue versus Stevenson. It became an even more beautiful nugget when the noble Lord, Lord Lyell, explained to me that it concerned a decomposed snail in a bottle of Stone’s ginger wine, which I think is still for sale. I shall treasure my new knowledge of the relevance of Donoghue versus Stevenson.
It is just like being told that the tooth fairy no longer exists. The noble and learned Lord has destroyed another illusion, but I thank him for the information.
I think that I have already covered some of the points made by the noble Lord, Lord Borrie. He has already received enough plaudits for his contribution; if we give him any more, he will not get out of the Chamber. We share his concern about the reduction of protection.
The noble Baroness, Lady Wilcox, spoke about the need for plain English and not having something that becomes almost a lowest common denominator. I believe that I have addressed her point about the full impact assessment.
The noble Lord, Lord Whitty, feels that we need to start again. I am not sure that we would share that view, but we share his underlying concern about ensuring a real improvement in consumer rights in going down this road. I believe that I have addressed most of the points made by noble Lords. If I have missed any, we will communicate in writing.
I reiterate the Government’s support for the principles that underpin this directive: consumer protection and the internal market. However, it is clear that there is much more work to do to secure a directive that meets both these objectives. We agree with the committee that the directive can be approved during negotiations; it should not be scrapped or rejected out of hand.
I have just realised that I did not pick up all the points made by the noble Lord, Lord Razzall, who rightly said that we should not be complacent even about our own rights and that there are areas capable of being improved—he gave us numerous examples. I share the view of the noble Lord, Lord Hunt, that we will not get a total media bypass on this issue, because it genuinely creates a lot of interest. My noble friend Lord Whitty will in any case ensure through his work that there will not be a media bypass. Another pleasurable part of the debate was his reminding us about the law of unintended consequences and the cones helpline. What a poignant moment that was. I can assure him that we can retain auto-enrolment. We share his concern about clarity, which is vital.
The Government are working hard to secure amendments to the directive that will provide the necessary levels of consumer protection and clarity. We are making progress and I remain optimistic that we can secure the necessary changes to achieve an overall high level of consumer protection.
As we have made clear, the UK Government support full harmonisation of consumer rights where there is evidence that minimum harmonisation and the resulting divergence in laws create barriers to trade and reduce consumer confidence. We will continue to work with the Commission and other member states to find solutions that can be accepted on a full harmonisation basis wherever possible, but we recognise that it may be difficult to achieve this in some areas.
We will not achieve the potential benefits that the directive can bring simply by insisting that all current UK provisions remain unchanged. All member states must be willing to amend and adapt their rules to achieve workable solutions to ensure that consumers across the whole EU benefit from the directive, but I stress again that it should not be at the expense of the clear protection that already exists.
Likewise, simply setting the level of consumer protection at the highest possible level will not necessarily benefit consumers or traders. The increased costs to business will simply be passed on to consumers, and increased burdens may force traders to withdraw from some markets, resulting in a reduction in consumer choice. So there is a balance to be struck in consumer rights.
We have been negotiating this directive in council for a year now. While the progress has been slow, we are making progress towards agreeing solutions on a number of key issues. Following the elections this year, the European Parliament has recently begun its detailed consideration of the proposal. We expect its report in the first half of next year.
The Government will continue to work with our European partners to improve the text of the directive so that it brings benefits for both consumers and businesses in the UK and across Europe. As we stated in our consumer White Paper published earlier this year, it is our intention to implement the directive through a consumer Bill of rights that will simplify and modernise UK consumer protection legislation so that all key consumer protections are contained in a single piece of legislation, making it easier for traders and enforcers to understand and apply the law and for consumers to understand and assert their rights.
I could not conclude this debate without once again thanking the noble Baroness, Lady Howarth, and the committee for a really valuable piece of work and an outstanding report.
My Lords, I thank all noble Lords who have taken part in a remarkable and in-depth debate. The committee will be reassured that so many other noble Lords in the Chamber have thought about these issues in such depth and continued to fight on behalf of the consumer while remembering that we also have to encourage business.
I was pleased that the noble Baroness, Lady Young, talked about information and that other noble Lords talked about clarity. Something that we were very concerned about was that many of our consumers do not understand our laws or their rights, even as they stand. For example, I speak as a consumer who discovered that when my garden gates did not work appropriately I could have sent them back within six years. This came as a surprise to me. Many consumers out there do not understand their rights.
If we make things more complex—and some of the links with contract law would make consumer rights extremely complex—rather than having straightforward regulation, our consumers will find it even more obscure, and Consumer Focus and Which? will have a harder job to make ordinary people aware of their rights. That is why the committee is so concerned that the Government should continue to fight for this directive to be clarified and to have a good basis in relation to consumers in the UK.
When the Minister began to reply, what he was saying sounded really encouraging, as though the Government were accepting what we were saying, until he got to the last paragraph, which, as I could see, somebody had written for him. Then we had this sort of speak: “Well, it will all be all right when we get there and we have to keep the balance”. I say to him that the devil is in the detail and, while he gives these broad reassurances, the right to reject and the issues about mixed contracts and all the things that we have debated this morning remain important to consumers. As we come to an election, I am not sure who will be prepared to give up those rights that the electorate find so extraordinarily valuable. Furthermore, I do not believe that doing so will improve cross-border trade—and I do not think that my committee believes that or that the report reflects that belief. We heard from many in industry that consumer confidence increased trade; that would be true across borders, too. Therefore, if Europe has good consumer law, that is more likely to improve cross-border trade than going down to a minimum of rights.
This morning we have some visitors from the Commission, who have been listening to the debate. I should say to the noble Baroness, Lady Hooper, that we met a number of people from other jurisdictions when we went through this subject. We were encouraged and helped by them. We were interested that other countries wanted us to keep our present level of consumer protection, because they wanted to get to it themselves.
In conclusion, I give special thanks to the committee. As a chair, you tend to get the accolades, which I always think is rather unfair. I had an extraordinarily able committee, whose probing, questioning and intelligence meant that we ended up with the report that we have before us. We also had an exceptional special adviser in Professor Geraint Howells, whose work I commend, as did the noble Lord, Lord Borrie. Our staff, the committee clerks and advisers, work to translate the committee’s views and the witnesses’ evidence into the report.
The one thing that I may have achieved as the chair is improving the clarity of the English. When I joined the Select Committee, I could understand about as much of what was going on as I did about the snail in the bottle. After my constant grumbling, and that of the noble Lords, Lord Grenfell and Lord Roper, I think that we speak plainer English, even in Select Committee. That is absolutely vital, because it reflects back to what we are saying about consumers and people in our communities. It is not that people are unintelligent but, if we do not explain to them what their rights are, how they can be understood and what they can do to improve their position, they have no hope of doing so.