House of Lords
Wednesday, 19 November 2014.
Prayers—read by the Lord Bishop of Worcester.
I thank the Minister for that precise answer. As today’s alarming ONS figures confirm, this Government are presiding over a recovery in which wages, far from recovering, have continued to deteriorate. As a result, the public finances are getting worse and social security spending targets are being missed by over £15 billion. The deficit continues to rise. Will the Minister tell us why this is the case, and say whether he agrees that in the light of this, the Prime Minister’s promise in October of further unfunded tax cuts lies somewhere between heroic and reckless?
My Lords, I remind the noble Lord, and the House, that growth in the UK is the highest among the G7 countries; that unemployment has fallen by 324,000 in the past year; and that the other piece of news today, which he omitted to mention, is that the gender pay gap has fallen to an all-time low.
Does my noble friend not agree that the most important point is that 3 million people at the bottom of the earnings pile, including 1.8 million women, have been taken out of income tax completely? At the same time, the Revenue’s take has increased by some £5.1 billion over the past year. Is that not a classic example of a stronger economy and a fairer society?
My Lords, will my noble friend tell us what the effect of cutting the top rate of tax from 50p to 45p was? Did revenues go up or did they go down? What was the effect of putting up the capital gains tax rate? Did revenues go up or did they go down?
My Lords, paying the living wage is something that the Government support but, as we have discussed before in your Lordships’ House, there is a balance between rising wages and unemployment. That is the basis on which the minimum wage is set. I gave an example from the Dispatch Box the last time we discussed this: having spoken to people working in the textile industry in Leicester, they demonstrated to me that a big increase in the wage that they were paid would mean that fewer of them would be earning it, because they would be out of the job.
My Lords, is it not the case that income tax should be a good deal higher, particularly if those in the higher ranges of income paid their full amount of tax? What are we doing to tighten the receipt of income tax from all who should pay it?
My Lords, the amount of income tax paid by the top 1% is now 28% of the total income tax revenues, which is the highest proportion it has ever been. That is because this Government have put substantially more money into fighting tax avoidance and evasion—far, far more—than the previous Administration.
My Lords, we have heard various Ministers refer to government employees in terms of paying the living wage. It appears to be a sort of “This ministry does, this ministry doesn’t” situation. Why does not the whole of government do that, particularly given that some of the people who work in those government departments live in London, where the cost of living is very high?
My Lords, as noble Lords will be aware, at the G20 last year the Prime Minister had this issue at the top of the agenda, since when the OECD has produced a whole raft of measures aimed at ensuring that companies pay their fair share of tax. Noble Lords will have seen the end of what was called the “double Irish” tax avoidance scheme in Ireland, and there are currently European Commission probes against tax avoidance in the Netherlands and Luxembourg. There has been a real tightening-up in this area, which was reinforced at the recent G20 summit.
My Lords, will the Minister reflect on what he has just said? If I heard him right, he said that most government departments were paying the minimum wage and that some are considering introducing it. Was that a slip of the tongue? Surely, no government department is paying less than the minimum wage. Did he mix up the minimum wage and the living wage?
My Lords, Ministers regularly discuss EU reform with counterparts in the EU institutions. The appointment of a new Commission offers a new opportunity for continued engagement on this subject. The Foreign Secretary held discussions with the European Commissioners’ first vice-president on this subject only two days ago. We will continue to take every opportunity to work with our European partners to achieve the reforms that Europe needs.
I thank the noble Baroness for her Answer. If the Government wish to see constructive and democratic reforms introduced into the governance and operation of the European Union, why are they not more open about their proposals? Would they not be more likely to succeed if they were to seek to initiate a new convention on the future of Europe which could achieve consensus about reform rather than threatening the other 27 member states with possible break-up?
My Lords, we have been very transparent about the reforms we want. The Prime Minister and the Deputy Prime Minister have set out publicly their vision for a more competitive, flexible and democratically accountable EU, with fair treatment for those within the eurozone and those outside it. That is in the interests of all member states. My noble friend refers to the potential for a convention. The only convention to date that has examined extensive revision of the treaties is the one in which my noble friend served some while ago. It compromised 105 full members, including Heads of State, members of national Parliaments, MEPs and Commission representatives, and the process took two and a half years. As a mature organisation, Heads of State are capable of talking to each other and coming to mature decisions.
My Lords, I am sure the noble Baroness will agree that Sir John Major commands enormous respect on all sides of this House. Will she therefore endorse very clearly what he said last week about our membership of the European Union: that despite the frustrations of membership, which are many, and despite the reforms that are needed, which are many, there is absolutely no doubt—without equivocation—that our interests lie in remaining a member of the EU? Do this Government agree with the former Conservative Prime Minister?
My Lords, I admire Sir John Major. I know the work he did as Prime Minister and within European matters, and the struggles that he faced. He above all people knows what is involved. I agree with what he said, which was that our future is within a reformed European Union. The Prime Minister David Cameron has said that, too.
Does my noble friend agree that successful and fundamental EU reform, which is badly needed, requires two things: first, a very strong alliance of the peoples and the Governments of the European Union, many of whom are longing for really radical reform to bring the EU into the 21st century and, secondly, a deeply thought-out strategy for the kind of EU model we need to work in the 21st century, which is at present lacking? Will she assure us that at the highest level these matters are being given very strong attention and are being pursued vigorously?
Will my noble friend the Minister confirm that once the opt-back-in to the 35 measures is complete, the UK will be in a strong position to push for reform in the areas of policing and criminal justice and civil liberties, including reform of the European arrest warrant, which is needed, as well as staying within the instrument itself?
My Lords, this Government have already reformed the process of the European arrest warrant. It is different from that which this House passed in 2004. The Government are strongly of the opinion that further reform is necessary across all aspects of EU activity to make it more flexible, competitive and democratically accountable.
My Lords, will the Minister reflect a moment longer on the Answer she gave to the noble Lord, Lord Maclennan of Rogart, about the idea of a convention, which was echoed to some extent by the noble Lord, Lord Howell of Guildford? It is not just a question of Heads of Government making decisions; it is a question of Heads of Government being able to convince their Parliaments about what is necessary in a reformed Europe. To do that, we need a wider coming together of the various political groupings in Europe. I think the noble Lord, Lord Maclennan of Rogart, is on to something and I ask the Minister to reflect again on that.
My Lords, I agree that the European Union needs to be more democratically accountable, and any changes within the European Union should therefore involve the participation of national Parliaments. There is much that can be done to ensure that national Parliaments have a stronger role to play. We now have a new Commission and a new head of the Commission, and there are prospects for a very constructive discussion about how we take these matters forward. In the first instance, it takes leadership and that is what the various Governments throughout Europe are showing now.
Does my noble friend agree that the championing of the single market under the Single European Act 1986 was one of Margaret Thatcher’s great achievements as Prime Minister, aided by a Member of your Lordships’ House, Lord Cockfield? Does she further agree that, about 30 years on from that date, there will inevitably be a number of areas where adjustments can and should be made in the interests of all member states without undermining the basic principles on which the single market is based?
My Lords, yes, I agree with my noble friend. I have tried to argue over the last four or five weeks that the single market is, indeed, a British success story—my noble friend makes an important point. The United Kingdom has played a leading role in shaping the single market. We have been instrumental in driving its continued liberalisation, particularly in services. My noble friend is right; this is 30 years on, so while the single market is Europe’s greatest success, it must reflect the needs of the 21st century, with a stronger market, particularly in services, both digital and in energy. Further reforms are needed and we can lead on that.
To ask Her Majesty’s Government whether they have made any proposal to other European Union member states, either severally or collectively, which would limit (1) the right of United Kingdom citizens to live and work in other European Union member states, or (2) the parallel right of citizens of other European Union member states to live and work in the United Kingdom.
My Lords, the Government have regularly engaged with other member states on the issue of free movement, the Home Secretary has consistently pressed for action on abuse and the European Council has recognised that this issue needs to be tackled. The Government have also started a debate on reforming the transitional controls for new member states and will engage constructively with other member states in discussion on how best to achieve change in this area.
I thank the Minister for his reply, which means no. The reason it is no is that it has obviously dawned on the Government, belatedly, that this would require reciprocation by all the rest of the 28 member states.
I have two supplementaries. First, does the Minister agree that there is a broad balance at the moment, not by design but by the facts on the ground, between the number of Brits living over there, in the EU, and the number of Europeans coming here? Roughly 2.2 million gain a living there and there are a few more here. Secondly, is the Minister aware that it is not exceptional to have this arrangement in Britain? Does he agree that, for example, there are far more people from the rest of the EU living in Germany—not least from Greece and Romania—than are living here in Britain?
First, my initial Answer was yes not no. It was that we have been engaging with Europe. The European Commission has endorsed this approach. The noble Lord referred to Germany. The German Government are passing legislation through the Bundestag to restrict the benefits of those who come to Germany when they are not genuinely seeking work. It was tested in the European Court of Justice. These are exactly the types of reforms and reviews which we have been pushing, from our side, and which are getting greater support across the other member states of the European Union.
Does my noble friend agree that tone is very important in these issues? We should show quite clearly how much we benefit from the large number of people from the rest of the European Union working here, and how much the rest of the European Union benefits from people from the United Kingdom going there. If we talked a bit more cheerfully about this—the greatest peacetime achievement that has happened in Europe—perhaps people would be more willing to listen to our comments.
I totally agree with my noble friend about tone. The British people have a reputation for hospitality and tolerance and have welcomed people who are making a positive contribution to our society. However, that of course has its limits and we need to be mindful that there is great concern about unrestricted, uncontrolled immigration into this country and the impact it has upon social cohesion and our public services.
My Lords, the Minister mentioned the reputation that this country has for hospitality. Is he aware of an associated issue: the difficulty that members of the Commonwealth face in obtaining a visa even to visit, let alone to work and live in this country, which seriously hampers a lot of very important overseas links with dioceses, including my own—so much so that my friends in Tanzania were unable to be present at my wife’s funeral earlier this year? Is that sort of impediment government policy and, if not, can he assure us that it will be addressed?
We very much encourage people to come to this country, whether to study or to work. We want to encourage the best and the brightest to come to this country, as well as tourists; there are many people we want to encourage—but there is a difference between that and people who significantly abuse the system in coming here because of benefits.
My Lords, following the point made by the noble Lord, Lord Deben, the very useful statistics on the numbers of EU citizens here as opposed to British citizens living in the EU brought forward by my noble friend Lord Lea—it is about exactly the same—and given the statement the other day by the director-general of the CBI, who does not know of a company in this country that is not in some degree dependent on immigration, will the Government agree that free movement of labour, apart from being a most valuable human right, is actually a factor of considerable economic importance in this country?
We totally agree with that. I have to say that the figures that I have are that there are 2.3 million EU nationals living in the UK and 1.4 million British citizens living in the EU. Those are very important for the success of the single market, which has already been referred to. Of course we welcome people who genuinely want to come here to work, study or visit.
My Lords, the United Kingdom has a proud record of campaigning for the enlargement of the EU and bringing our eastern colleagues in Europe into the fold of the European Union. We have had great credit for that in the past. Is it not a great shame that through our rhetoric we are turning those countries that came into the European Union in 2004 from friends into people who resent our attitudes towards them?
I do not accept the premise that we are alienating people. People recognise that there are legitimate concerns here; if proper transitional arrangements are put in place, that can aid relations between both countries, such as the ones that we have used in the case of Croatia, which will remain in place until 2019.
My Lords, the Minister will have heard the disappointment and concern on his side of the House that the Government do not seem to be building workable relations with other countries in the European Union. That makes any change much more difficult. Could the Minister tell me specifically which member states have backed the Prime Minister’s proposals to restrict free movement within Europe?
We are not talking about restricting the free movement of labour—we are talking about restricting the free movement of benefits. I have already listed a number of countries, and Germany is a prime one, which have particular concerns on this that are shared. That includes some of the Nordic countries as well. Some of those countries also had transitional arrangements put in place when we enlarged with the A10 countries in 2004, which the previous Government did not put in place. That led to the major problem that we are now living under.
I was going to say that that is a question for another day. That will of course be part of any wider negotiation, but let us recognise that in the case brought by the German Government before the European court about benefit tourism—the Dano case—the court actually upheld the decision, which is something that we and the German Government welcome.
Alcohol: Sale to Children
To ask Her Majesty’s Government, further to the answer by Baroness Williams of Trafford on 17 November, in what manner the proposal to repeal the restriction on the sale of liqueurs to children formed part of the public consultation on the Deregulation Bill.
My Lords, the proposal to repeal the offence of selling liqueur confectionery to those under the age of 16 is part of the Government’s Red Tape Challenge, which seeks to remove unnecessary burdens from businesses. A public consultation led jointly by the Department for Business, Innovation and Skills and the Cabinet Office asked businesses and members of the public for their views on deregulating a wide range of regulated activity.
My Lords, I am grateful to the Minister for at last answering the questions I raised on that, but I find her Answer quite unacceptable. I have before me the policy guide to the Deregulation Bill, published by the Cabinet Office for the Minister responsible, which says under the details of consultation only:
“The proposal has not been part of the public consultation, but was suggested by business”.
That was produced by the Cabinet Office. Why do the Home Office, the Ministers and others concerned not know what is happening on this?
Is my noble friend aware that I sat on the pre-legislative scrutiny committee for the Deregulation Bill, and that it was made clear to the members of that committee that, yes, each department was asked to put forward proposals, and anybody— an organisation, an individual or any party that had validity in the United Kingdom—could make representations? Indeed, in some areas huge numbers of representations were received. My noble friend is absolutely right. Representations did not come just from business; it was open to anybody who wanted to make a submission on liqueur chocolates to do so.
Does the noble Baroness agree that it might have been a better hallmark of responsibility and of trust towards young people had there been an investigation by health authorities of the possible injurious effect of the ingestion of alcohol in any form on young people; and that that would have been much better than surrendering to the blandishments of business, which might not be entirely free of self-interest?
My Lords, I would press the noble Baroness on this, because there is some confusion. In Committee, when this was discussed, the noble Lord, Lord Wallace, who was answering for the Government, said that it was not a matter for business and business had not asked for this. He thought it was a retail issue. However, the consultation policy briefing document from the Cabinet Office says:
“The proposal has not been part of the public consultation, but was suggested by business”.
Given that there are some concerns, which may or may not be justified, about deregulating the sale of liqueur chocolates to children, would it not be better, as the noble Lord said, to consult those who have an interest in public health and are concerned about alcohol misuse, and ask what their views are? Would that not be the more sensible way forward on an issue that is becoming controversial?
My Lords, obviously I was not there on the Deregulation Bill, but it is my understanding that this consultation was open to anybody who wished to respond to it. It was widely advertised on the government website and, as I just said to the noble Lord, health bodies did not raise concerns about liqueur chocolates on this theme of restricted goods.
I regret having to come back to this but we must get to the truth. This was not part of the consultation. Indeed, this document has been taken down from the Cabinet Office website. Why, when the health of children is affected, have the Government not consulted their Chief Medical Officer, who is opposed, Public Health England and all the other health authorities that have a view—a view that they have so far not expressed because they have not been invited or asked to consult?
My Lords, I can have a note sent to the noble Lord about why specifically health bodies were not consulted. In seeking to get the truth, I can assure the noble Lord that I am not evading it, but answering with the best information that I have.
My Lords, is not the issue that there was a general consultation, which asked, “Do you have any ideas for deregulation?”. That is how, on licensing, the idea of deregulating liqueur chocolates came into being. That is the issue and the truth. The truth is that the idea of carrying out this precise measure was never put to anybody else. Health authorities would probably never even dream that somebody would be daft enough to include that in the Deregulation Bill.
I totally agree with the first part of the noble Baroness’s question, which she put very clearly—it was all part of the Licensing Act and general deregulation. As I said, there has been no response from health authorities on concerns over chocolate confectionery, but it was covered by the general strand of restricted goods.
Insurance Bill [HL]
That, as proposed by the Committee of Selection, the following Lords be appointed to the Special Public Bill Committee on the Insurance Bill [HL];
L Ashton of Hyde, L Carrington of Fulham, L Davidson of Glen Clova, Hodgson of Astley Abbotts, L Lea of Crondall, L McNally, L Newby, B Noakes, L Woolf (Chairman);
That the Committee have power to send for persons, papers and records;
That the evidence taken by the Committee shall, if the Committee so wishes, be published
Delegated Powers and Regulatory Reform
Social Security (Contributions) (Amendment No. 5) Regulations 2014
Social Security Contributions (Limited Liability Partnership) Regulations 2014
Motions to Approve
Broadcasting (Independent Productions) (Amendment) Order 2014
Legislative Reform (Entertainment Licensing) Order 2014
Motions to Approve
That the draft Orders laid before the House on 8 and 21 July be approved.
Relevant documents: 8th Report from the Joint Committee on Statutory Instruments, 6th Report from the Regulatory Reform Committee, considered in Grand Committee on 17 November
Infrastructure Bill [HL]
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Infrastructure Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
1: After Clause 3, insert the following new Clause—
“General duties of a strategic highways company
(1) A strategic highways company must, in exercising its functions, co-operate in so far as reasonably practicable with other persons exercising functions which relate to—
(a) highways, or(b) planning.(2) A strategic highways company must also, in exercising its functions, have regard to the effect of the exercise of those functions on—
(a) the environment, and(b) the safety of users of highways.”
My Lords, I agreed on Report to come back with amendments on two aspects over which noble Lords had concerns. I tabled Amendment 1 in recognition of noble Lords’ preference for the strategic highways company’s duties to be stated in legislation. It places a duty on the company in relation to the environment, safety and co-operation, noble Lords having expressed the strongest concern that that should be made clear. We have already made considerable change in taking on board concerns that were raised in Committee and on Report. It is the Government who must set broad policy on the environment and road safety and noble Lords will be aware that we have already amended the Bill to include an obligation on the Government to have regard to the environment and safety of users of the highway when setting or varying the road investment strategy. We are now taking this further by placing a duty on the company to consider those matters, meaning that the company itself is obliged to consider the impact of its operations on environment and safety.
Moreover, your Lordships will know that we have made changes to the powers of the monitor—the ORR—to hold the company to account and to measure and report on the company’s performance and whether it is meeting its duties, including on the environment and safety. I remind your Lordships that, in parallel with these high-level duties, we are using statutory directions and guidance from the Secretary of State to steer the company in the way it exercises its functions. We have extensively redrafted these prior to Report to reflect your Lordships’ concerns and these same issues are covered in great detail there.
In addition, your Lordships will note that we have also done even more than relying on statutory direction or guidance to ensure that the company co-operates. It now has a clear duty to co-operate in the areas of highways and planning with local authorities, devolved Governments, operational partners—such as the police and emergency services—other transport operators, and other bodies with a significant stake in the long-term development of the network.
I tabled Amendment 16 in recognition of your Lordships’ concern that there may be more than one strategic highways company provided for in Part 1 of the Bill. I have explained to the House that the Government have no plans to create more than one company and that the Highways Agency—in its new status as a government-owned company—will be the only company appointed when we bring these provisions into force. I recognise that further reassurance is needed on this point and therefore propose an amendment requiring parliamentary approval if the Secretary of State wishes to make an appointment order under Clause 1 which involves moving away from a single company structure. This strikes a balance in providing the flexibility for future Governments to move to a different structure—for example, a regional structure—should it be needed or desired, without the need for further primary legislation on the point, while meeting your Lordships’ desire for further discussion and approval by Parliament on the detail of how a multiple company structure would work in practice before allowing it to proceed. I hope that this provides a sensible compromise between your Lordships’ concerns and our desire to maintain a potentially useful option for the future, and for this reason.
In summary, I hope your Lordships recognise the effort we have made to ensure that there can be no doubt about what responsibilities the company has or how it will be held to account and that we have advanced considerable changes to meet the views expressed in this House. I beg to move.
My Lords, I am grateful for these amendments, which certainly improve the Bill. I congratulate the Minister on the way she has conducted herself at the various stages of the Bill and on bringing forward these amendments in response to the arguments put forward in Committee. Those arguments were put forward particularly forcefully by my noble friends Lord Whitty, Lord Faulkner and Lord Berkeley. As the Minister will know, we started off with a great many reservations about the nature of the Bill and we are very pleased that the Government have gone some of the way towards making it slightly more difficult for multiple strategic highways companies to be set up. Amendment 16 ensures that Parliament will have a say on this, which is very much to be welcomed. I particularly appreciate Amendment 1, which ensures that the strategic highways company has regard to the environment and to the safety of users of the highways. These were issues about which we were very concerned on the Opposition Benches and we are pleased that the Minister has seen fit to propose amendments to the Bill as it then was.
However, it is still the case—as I am going to speak only once I hope the Minister will forgive me for moving a little further on—that there are questions which the Government have not adequately considered. An example is the needs of local roads in dealing with the challenges of huge numbers of potholes and the projected increase in traffic. The fact is that it is not the strategic system which creates the majority of problems for road users but local roads. The same applies to safety, where the Government have presided over a large reduction in road safety budgets and further action may be required. Among others, I obviously mention the issue of cyclists. That may seem marginal in a Bill that is predominantly concerned with strategic highways but, if one is talking about safety, one has to look at the growing use of cycles on our roads. That is greatly to be welcomed in many respects—provided that cyclists obey the law, I hasten to add—but we must also ensure that we do not get the kind of significant increase in cycling accidents that we have seen in recent years.
It would also be helpful if the Minister would provide further details on what is meant by—this is the phrase used—
“have regard to the effect of the exercise of those functions on … the environment”.
What will that mean in practice? Only today, the European Court of Justice called on the United Kingdom to establish the air quality action plan, which sets out measures to tackle air pollution. We know that traffic is inevitably a great dimension of the problem of air pollution.
A number of issues elsewhere in this part of the Bill are still unresolved. First, the process of setting the first road investment strategy looks somewhat rushed to us. It is clearly essential that the Government get this right, given the importance of this infrastructure development over a long period. Secondly, we are not entirely clear about the governance of the company—it still seems confused to us. Will it be through a licence that is not really a licence or will it be through statutory guidance? Those questions were not answered with total accuracy in Committee.
Finally, the fundamental question at the heart of this part of the Bill remains totally unanswered. It concerns the creation of the new company, which is what the Bill starts off with. I mention to noble Lords who may not have followed its progression in the greatest detail that one significant clause on fracking was added after we had cleared four parts of the Bill. Of course, it is difficult to respond when a Bill has no coherent pattern and has so many aspects to it. However, this point stands out. Is the creation of a new company really the best way to secure long-term funding for roads? I still suggest that the Minister has not been fully convincing on this point. I am sure that when the Bill goes to the other place the Members there will want to test this proposition further. But I am grateful to the Minister for the progress she has made thus far.
Amendment 1 agreed.
Clause 26: Property etc transfers to the HCA
2: Clause 26, page 26, line 32, leave out “and” and insert “to”
I shall speak also to Amendments 3, 4, 6, 8, 9, 10 and 12. Maximising the release of surplus public sector land is critical to supporting the Government’s ambitions to reduce the deficit, increase the number of houses being built and help to drive economic growth.
The new public sector land programme from 2015-16 will mean transferring a significant amount of surplus and developable land from government bodies to the Homes and Communities Agency and, in London, to the Greater London Authority. Disused government land can and does already transfer to the Homes and Communities Agency but the process is often more bureaucratic than is necessary. Clause 26 is about simply increasing the rate of delivery and efficiency by streamlining what essentially is an internal government procedure.
As I believe the House now largely accepts, the intention behind Clause 26 is not and has never been to sell off the nation’s forests. In recognition, however, of the strength of the House’s concern about the future security of the public forest estate, my noble friend Lord Ahmad committed on Report to table an amendment to make it clear in law that the public forest estate will not transfer to the HCA. The amendment we have tabled will prevent transfer of the public forest estate to both the Homes and Communities Agency and the Greater London Authority.
We have gone further than the amendment tabled by the noble Baroness, Lady Royall. Our amendment additionally seeks to address an oversight we have now identified in the original Housing and Regeneration Act 2008, which was passed under the previous Government. Section 51 of that Act makes it possible for land owned by central government to transfer directly to the HCA. The public forest estate is, of course, owned by central government and not—as we have repeatedly made clear when asked about these clauses—by an arm’s-length body. Needless to say, since the Labour Government introduced powers to transfer the public forest estate to the HCA six years ago, we have not used them. I am sure the fact that the legislation allowed this was an oversight rather than intentional, so we are now amending the 2008 Act to prevent any transfers under these existing powers. This now covers any transfers from a government department to the HCA where the land is part of the public forest estate.
I also make it clear that our amendment already covers the contingency that the amendments tabled by the noble Baroness, Lady Royall, seek to address. Our amendment will prevent the transfer of any land that is held by the Secretary of State and has been acquired, or is treated as having been acquired, under Section 39 of the Forestry Act 1967. This definition, therefore, covers all land that is under the management of the forestry commissioners at any given time, as well as land that is not being used for afforestation or purposes connected with forestry. I trust that this amendment will provide the comfort that noble Lords have sought on this issue.
In the same debate on Report, the noble Lord, Lord Phillips, raised a query about the potential scope of this clause, asking whether the definition of “public bodies” is too broad for the stated aims of the clause and whether it could, for example, allow for the transfer of land owned by charities. The noble Lord, Lord Ahmad, has written to the noble Lord, Lord Phillips, to set out why we think this clause is not likely to extend to the transfer of land from charities. However, for the avoidance of any doubt, we wish to make it clear in the Bill that transfers to the HCA or GLA using this power may happen only with the consent of the transferring body. I trust that this will allay any concerns that there would be any potential for a future Government to misuse this power. I beg to move.
My Lords, I will speak to Amendments 5, 7, 11, 13 and 14. I thank the Minister for coming back with the government amendments. I know that campaigners who have fought to protect our forests are also pleased that the Government have responded to their concerns. I am also grateful to the Minister and the noble Lord, Lord Ahmad, and their officials for the work they have put into ensuring that the exemption of the public forest estate from the Infrastructure Bill is in the Bill. However, while I accept what the Minister is saying about an oversight, her line of argument appears contradictory to statements at previous stages of the Bill when it was said that transfers of the PFE under this legislation could not happen. However, that is history.
I have tabled amendments to the government amendments with one aim—to make sure that the entire public forest is given the protection that noble Lords and campaigners have asked for throughout the passage of the Bill. However, I am still concerned about forest waste. Forest waste—in the forest that I know best, the Forest of Dean—is usually taken to mean land within or on the margins of the forest, not planted or used for forestry purposes. Forest waste is of great value in terms of biodiversity, ecology, amenity and recreation. Within the Forest of Dean there are a number of gales—shallow workings mined by free miners. These mines are clearly not used for afforestation or in connection with forestry, but they are a central part of the history and character of the Forest of Dean.
I am concerned that this forest waste may not be included and there could be some ambiguity as to whether it is suitable for afforestation or purposes connected with forestry. My disquiet is principally due to the part in brackets in Amendment 12 that states:
“(power to acquire land which is suitable for afforestation or purposes connected with forestry)”.
That does not include,
“together with any other land which must necessarily be acquired therewith”,
which is in Section 39(1) of the Forestry Act. I would be grateful for clarification from the Minister on that point. Will she confirm that forest waste is exempted from the Infrastructure Bill? In which case, I hope that she will accept my amendment as confirmation that this is the case.
Once again, this reflects the key message that arose repeatedly in our debate on Report on the need for the Government to legislate through a forestry Bill to protect the public forest estate. As the Woodland Trust said in its briefing ahead of Third Reading, for which I am grateful:
“We hope that the Third Reading debate, any subsequent further amendment—and scrutiny in the Commons—will ensure that protection is as strong as possible. Whatever the outcome of the Bill’s passage, however, it has to be said that this is a row of the Government’s own making through not bringing forward a Forestry Bill as promised. Indeed, this assurance within the Infrastructure Bill cannot be deemed a substitute for the bringing forward of legislation for the Public Forest Estate; a specific Forestry Bill is still needed to settle the future of the PFE and for the avoidance of any future doubt or confusion as to its status. We want to see that legislation brought forward at the earliest opportunity after the election”.
I strongly echo those sentiments. Again, I thank the Minister, but I also pay tribute to the campaigners, particularly those from HOOF who, through their dedication, care and passionate love of the forest, have fought time and again to ensure that it is protected for future generations.
My Lords, I support my noble friend’s amendment. I take her point about forest waste. Equally, I am very grateful to the Government for the way in which they brought forward these proposals. On the face of it, they take us further forward and appear to give us greater protection.
I am delighted that the Government managed to find a weakness in the 2008 Act but it is very important that the assurance that I think the Minister gave today was that it included all land managed by forest commissioners. That is very important because, in recent years, we have had joint initiatives and joint ventures with the private sector that are not forestry—the provision of forest cabins, car parks, and so on. I remind the Minister that the Wildlife and Countryside (Amendment) Act 1985 required statutorily the Forestry Commission to manage economic forestry with environmental interests.
My noble friend referred to forest waste, which is vital. The Lake District, for example, includes a great many of the highest mountains in England, and is owned by the Forestry Commission but trees will not grow there and are not planted there. We must have an assurance that those areas of land are covered by the protection that the Minister seems to have brought forward today.
My Lords, I do not begin to claim the same amount of expertise as the noble Lord, Lord Clark of Windermere, who of course is a former chairman of the Forestry Commission. We listen to him with huge respect on these matters.
I was puzzled by the amendment tabled by the noble Baroness, Lady Royall, and was not quite sure about its precise aim until she explained. I was under the impression that when my noble friend Lord Ahmad of Wimbledon undertook to bring back amendments at this stage, he greatly satisfied the House. A very strong case had been made by the noble Baroness and by other noble Lords that there was a real need to declare in the Bill the protection of the public forestry estate. I supported that and I was very glad to hear my noble friend Lord Ahmad at the end of the debate recognise the strength of feeling in the House and undertake to come back at this stage with the amendments.
Since then, I have read the letter that he circulated to us yesterday. It struck me that this spelt out very clearly how the amendments that my noble friend has tabled and to which she has spoken this afternoon seemed, at first sight, to go the whole way to giving the additional protection that the noble Baroness, Lady Royall, was seeking.
I understand the point about forest waste, but I have always felt that forest waste is an integral part of any forest. The noble Lord, Lord Clark of Windermere, mentioned car parks and huts. To my mind, it is inconceivable that a car park, which is sited in a forest for the purpose of visitors to the forest so that they can get there from wherever they are coming from and park a car so that they can from that point explore the forest, is not part of the forest. It must be part of the forest; it does not need to be specially mentioned.
I listened to the noble Baroness with some interest, but I am not clear even now that her amendment is necessary to achieve the protection that we all sought and which my noble friend Lord Ahmad was very clear that he was prepared to give. The amendments that my noble friend Lady Kramer will be moving really do meet the case. I remain to be persuaded that the amendments of the noble Baroness, Lady Royall, are additionally necessary.
At earlier stages of the Bill, I drew attention to the widespread and spontaneous concern—quite unprecedented in some ways—that had come from people right across the country about the precious and special nature of our forests. I think, therefore, that among a lot of people, there will be a great sense of relief at the amendment that the Government have introduced. Credit should be paid to them for the very commendable way in which they listened to the argument, went away and came back and responded to what the House said.
As for my noble friend’s amendment, I totally see the logic and importance of it. If we have just said that the other amendment is essential because of the very special nature of the forests—let us not be afraid of these phrases: the atmospheric nature of the forests, the spiritual nature of the forests, the physical and recreational nature of the forests—it really is important that intrusions, by carelessness or deliberate action, which spoil that special nature should be dealt with in a way that preserves the special characteristics of the forest. The two amendments go completely together. I hope that the Government will be able to take very seriously what my noble friend has argued and accommodate it.
I congratulate the Minister on listening to the points that a lot of us in this House made. As a rider to what has been said, a very important part of forestry—speaking as someone who has some—are those strips of land where you can extract timber to cut it up and prepare it to go to the timber mill or wherever it is going. This area that we talk of as waste is vital. To people in the country, it is not unlike those elements that you get at the sides of fields that are often put to set-aside or for biodiversity. The amendment makes a very good point and I am sure that the Minister will reassure us on it.
My Lords, I think that we are all at the same place on this. My argument against the amendments of the noble Baroness, Lady Royall, is that they are unnecessary, because the issue is entirely covered in the language that I hope we will be bringing into the Bill through amendment, if your Lordships agree. The amendments prevent the transfer of any land held by the Secretary of State that has been acquired—remember, this is government-owned land—or is treated as having been acquired under Section 39 of the Forestry Act 1967. As I said earlier, that covers all land that is under the management of the forestry commissioners at any given time—whether by freehold or leasehold—and includes any land that is not being used for afforestation but is still under the management of the forestry commissioners or is not being used for purposes connected with forestry.
The provision is widely drawn. Not only does it include forest waste, it includes the kind of ancillary facilities that many noble Lords have pointed out are necessary. Indeed, there is not even a necessary test: it simply has to be under the management of the Forestry Commissioners. I am sure that that is exactly what the noble Baroness, Lady Royall, and the various campaigners were attempting to achieve.
We think that we have done this rather effectively because one of the challenges of writing legislation is to make sure that we do not include another unintended loophole. We think that this approach is rather effective. I hope that noble Lords will understand why I will resist the amendment because I believe that its principle is well incorporated into the amendments that we introduced.
This may be the last time that I have the opportunity to speak in the House on this phase of the Bill before it goes to the other place. The last group of amendments will be led from the Government’s perspective by my noble friend Lady Verma. I want to say that, in a sense, this last discussion reflects what has been an extraordinary quality of this Bill, for which I thank the whole House. So many Members of the House have taken responsibility for raising issues of concern, strengthening the Bill, looking for ways to make it more effective and recognising the underlying purpose and intent. The collaborative attitude of so many Members of this House—I include the Opposition in that—has led us to a Bill that will serve its purpose even better than the Bill that we originally drafted.
At the same time, I want to thank the most extraordinary Bill team who have facilitated and made all of that possible, and the staff from the many departments that have contributed to the Bill. They have shown an exemplary service in making sure the legislation reflects the genuine intent of this House. I thank the House for allowing me to proceed with this as well. The last group of amendments will be led by my noble friend Lady Verma.
Amendment 2 agreed.
3: Clause 26, page 26, line 44, at end insert—
“(4A) The Secretary of State may not make a scheme under this section unless the specified public body to which the scheme relates has consented to its provisions.”
Amendment 3 agreed.
4: Clause 26, page 26, line 44, at end insert—
“(4B) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
Amendment 5 (to Amendment 4) not moved.
Amendment 4 agreed.
6: Clause 26, page 28, line 13, at end insert—
“(2A) In section 51 (property etc transfers) after subsection (3) insert—
“(3A) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).””
Amendment 7 (to Amendment 6) not moved.
Amendment 6 agreed.
Amendments 8 and 9
8: Clause 26, page 28, line 23, leave out “and” and insert “to”
9: Clause 26, page 28, line 37, at end insert—
“(3A) The Secretary of State may not make a scheme under this section unless the specified public body to which the scheme relates has consented to its provisions.”
Amendments 8 and 9 agreed.
10: Clause 26, page 28, line 37, at end insert—
“(3B) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
Amendment 11 (to Amendment 10) not moved.
Amendment 10 agreed.
12: Clause 26, page 31, line 15, at end insert—
“(5A) In section 408 (transfers of property, rights or liabilities to the Greater London Authority etc) after subsection (8) insert—
“(8A) An order under subsection (1) above may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
(5B) In section 409 (transfer schemes for transfers to the Greater London Authority etc) after subsection (8) insert—
“(8A) A scheme under subsection (1) or (2) above may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).””
Amendments 13 and 14 (to Amendment 12) not moved.
Amendment 12 agreed.
Clause 38: Further provision about the right of use
15: Clause 38, page 45, line 10, at end insert—
“(4A) A person (“L”) who owns land (the “relevant land”) is not liable, as the owner of that land, in tort or delict for any loss or damage which is attributable to the exercise, or proposed exercise, of the right of use by another person (whether in relation to the relevant land or any other land).
(4B) For that purpose, loss or damage is not attributable to the exercise, or proposed exercise, of the right of use (in particular) if, or to the extent that, the loss or damage is attributable to a deliberate omission by L.
(4C) There is a “deliberate omission by L” if L, as owner of the relevant land, decides—
(a) not to do an act, or(b) not to allow another person to do an act,and the circumstances at the time of that decision were such that L would not have had to bear any of the costs incurred (whether by L or any other person) in doing or allowing the act.”
My Lords, the UK stands to benefit enormously from the safe and effective development of the offshore shale gas and oil and geothermal industries. The Government have introduced provisions into the Infrastructure Bill which provide a right to use deep-level land 300 metres or more below the surface for the purposes of exploiting petroleum or deep geothermal energy.
I explained on Report that I had listened to the concerns expressed by stakeholders and by noble Lords that the right to use deep-level land could disadvantage landowners if claims were brought against them in connection with petroleum or deep geothermal operations. While the existing regulatory regime is robust, I agree that we can do more to reassure landowners. We need to be clear that these sorts of claims—brought by a third party against a landowner whose land is accessed through the right of use clauses—cannot be made against a landowner who has done nothing wrong. To this end, I committed to table an amendment to address this issue.
The amendment will provide protection for landowners against claims made by third parties for any loss or damage caused by the exercise of the right of use provision. It does, however, ensure that landowners—including persons with an interest in land, such as persons licensing the land—will not benefit from the exemption if they deliberately fail to act, or decide not to allow someone else to act. To make this fair to landowners, we also propose that a landowner would not have to do anything that would ultimately involve them in bearing any costs. This means, for example, that if a landowner prevented an operator from accessing his land to remediate any damage caused, despite the landowner not having to bear any costs, that landowner could be deemed liable. If, by contrast, the landowner allowed for the damage to be remediated, this amendment ensures that, as well as benefiting from existing protections, the landowner would not be liable to claims from any third parties for loss or damage.
This amendment will complement the existing comprehensive statutory and regulatory regime by protecting landowners, while allowing this source of home-grown energy to develop in a way that is fair to communities. I beg to move.
My Lords, I thank the Minister for having explained that amendment. I must admit that, when I went through it, I was not at all clear what it was trying to get at. I wondered whether this mystery person “L” would be listening to the debate or appearing in it. We have a number of such letters in this Bill.
My noble friend Lady Kramer has already thanked a number of people. I am not sure whether I am in the right area to do this but I want particularly to thank my noble friend Lady Verma for the work that she has done on this Bill. It has gone through everything from community energy to fracking to this whole area of oil. It has been a pleasure to work with her. We have our disagreements more in DCLG areas rather than here, but the Bill when enacted will make a number of things in the area of energy much better.
I also thank my noble friend Lady Kramer for guiding a Bill through the House when only about 10% included her departmental responsibilities. She has been present for a lot of our proceedings even when matters far from her department’s responsibilities were involved. Of course, I support the amendment.
My Lords, while agreeing with everything that my noble friend Lord Teverson said, I would like to make particular mention of my noble friend Lady Verma’s readiness to listen to the arguments on Part 4 concerning the community electricity right. The concession that the Government made on the timing of the power to introduce regulations has been widely welcomed by the renewables industry. It was very wise, and I was extremely grateful when my noble friend signalled that there would be an amendment on Report; I said so at the time.
I, too, thank both Ministers for their part in the Bill and, in his absence, my noble friend Lord Ahmad, who played quite a notable part in the whole question of planning and other responsibilities that fell to his department. I also echo what was said earlier by my noble friend Lady Kramer about the Bill team. They have been extraordinarily helpful. I do not mind at all if, when one raises a point at a private meeting, one receives a very good explanation from one of my noble friends’ staff. Although it is always nice to get letters from one’s noble friends who are Ministers, to have such an authoritative statement from an official is equally helpful, and I thank them very much for that.
This has been a remarkable example of the House of Lords at its best in its role of scrutinising and revising legislation. There are still one or two issues which are not fully resolved, but it is with some relief that we will send the Bill to another place where, perhaps, they can be aired again.
As many noble Lords will have learnt, it is my intention to retire from the House shortly, and I am making it clear to anyone who cares that this will be the last Bill on which I will take an active part. I have enormously valued the opportunity to do that, and I look forward to what is now being called the valedictory speech—which is not today, it will come later—that retiring Peers will be entitled to make under the provisions of the report of the Procedure Committee. I have enjoyed it; I think we really have made a difference; and I think that that is what this House is for.
My Lords, as the House is in congratulatory mood, I briefly congratulate the noble Lord, Lord Jenkin. I first met his formidable intellect, advantages and knowledge on energy Bills a decade or so ago, when we went through a very long energy Bill. From what I can recall, he was present for virtually every minute of a Bill that went through 13 days or so in Committee, to say nothing of the extensive consideration elsewhere. Others will have the chance to congratulate him later, but with regard to this Bill, he has displayed his usual insight and talent to improve the legislation. I also, of course, second his point about congratulating the noble Baroness, Lady Verma, and the Bill team—although I may say that they have only started the long road. I predict challenges yet to come on all parts of the Bill but in the area of fracking, I think that they will have quite an interesting time in the other place.
My Lords, I am extremely grateful to all noble Lords for their participation in our proceedings on this Bill, particularly our discussions outside the Chamber, which have been very helpful. I end by thanking my noble friend Lord Jenkin for being there throughout all the energy Bills that I have worked on. He has provided a stream of information and expertise, and I have learnt a great deal from him in the past two and a half years at the Department of Energy and Climate Change. I wish him well. His forensic examination of legislation has made us all realise that this House has such excellence to offer that we should never underestimate the expertise among those who sit here.
Amendment 15 agreed.
Clause 45: Regulations and orders
16: Clause 45, page 51, line 5, at end insert—
“(1A) A statutory instrument which contains an order under section 1—
(a) appointing a strategic highways company for an area other than the whole of England, and(b) which is the first exercise of the power in respect of such an area,may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(1B) A statutory instrument which contains an order under section 1—
(a) appointing a strategic highways company for an area other than the whole of England, and(b) which is a subsequent exercise of the power in respect of such an area,is subject to annulment in pursuance of a resolution of either House of Parliament.”
Amendment 16 agreed.
My Lords, I owe the most extraordinary thanks to two of the most brilliant colleagues, the noble Baroness, Lady Verma, and the noble Lord, Lord Ahmad. I also regret the fact that, sadly, the noble Lord, Lord Jenkin, may not be here again on another Bill. We shall desperately miss him. I beg to move the privilege amendment.
A privilege amendment was made.
Bill passed and sent to the Commons.
Consumer Rights Bill
1: After Clause 3, insert the following new Clause—
“Consumer credit: bill of sale
(1) Where a person is a purchaser of goods subject to a bill of sale, made in connection with a regulated agreement under the Consumer Credit Act 1974, in good faith and without notice of the bill of sale, title to those goods shall pass to that person.
(2) A creditor is not entitled to enforce a bill of sale made in connection with a regulated agreement by recovering possession of the goods except through an order of the court.
(3) If goods are recovered by the creditor in contravention of subsection (2)—
(a) the bill of sale will be treated as invalidly made; and(b) the debtor shall be released from any outstanding liability under the regulated agreement.(4) If the creditor has disposed of goods taken in contravention of subsection (2), the debtor shall be compensated to the value of those goods.”
The amendment stands in my name and that of my noble friend Lady Hayter of Kentish Town. I declare my interest as retiring chair of the charity StepChange. Your Lordships’ House will be well aware of the considerable influence that it has had in curbing the explosion of high-cost credit that has so disadvantaged consumers in recent years. However, there is more to do.
The purpose of the amendment is to level the playing field on logbook loans by requiring the lender to obtain a court order before repossessing goods being repossessed by this archaic system, which uses legislation first introduced in 1878. A logbook loan is a bill of sale securing a loan on an asset, often a vehicle, and it gets its name from the fact that the lender retains the vehicle’s logbook or vehicle registration certificate, the V54, until the loan and any outstanding interest are repaid. Logbook loans are another form of very high-interest credit, and share with payday loans the use of unfair terms and conditions. They tend to be used by people who have bad credit ratings but need cash quickly. If you check them out on the internet you will find that an application for a logbook loan can be completed in as little as 15 minutes.
Recent research shows that logbook loans secured by a bill of sale are generally for amounts ranging from £500 to £2,000; the average is about £1,000. They are typically repaid over a six to 18-month period. The APR varies, but tends to range between 200% and 500%. These are not cheap loans.
It is the use of a bill of sale that causes the most difficulty. The legislation governing such loans, which dates from Victorian times, means that, uniquely in the high cost credit market, the lender can repossess the debtor’s asset—the vehicle—without a court order. We need to change this, to level the playing field. Bills of sale are already illegal in Scotland. Should we not take a leaf out of its book?
The history of this is interesting. After reviewing the position in December 2009, the previous Government proposed to ban the use of bills of sale for consumer lending, but, after the election, the coalition Government decided not to go ahead but to rely on a voluntary code of practice. Recent research by Citizens Advice shows that there is likely to be a 60% increase in bills for sale registered from 2011 to 2014. We believe that it is now time to stamp out this arcane practice. The Victorians had much to commend them but this legislation is not their finest monument.
When we raised this issue in Committee, the Government response was twofold. First, the Minister confirmed that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform bills of sale. This is indeed somewhat ironic, given that we had a debate only yesterday on Schedule 20 to the Deregulation Bill, when the Government were rather limply trying to defend their decision not to ask the Law Commission to review acres of what they call “legislation no longer of practical use”. However, this process will take time and unless the noble Baroness has some more information to share with us, it seems highly likely that this issue will not get into the next Law Commission Bill, which is unfortunately not due until 2016. The Government also pointed out that the FCA is in charge of this sector of consumer credit and mentioned that it had defined logbook loans as “higher risk activities”. That is certainly not wrong but when, oh when, will they get around to doing something about it?
As we found with payday lenders, it does no harm to give the regulator a bit of a push when you think that it may not get to the right place quickly enough. Consumer detriment is happening now and it ought to be stopped, so our amendment follows the approach that the House took to capping payday lending, as a sort of regulatory push. As well as welcoming the promised robust action by the FCA, we think it is appropriate to hasten it on its way. If loan book lenders have to use the courts to repossess goods, it will level the playing field with the other consumer credit operators and make it more likely that many will exit the market. That would be “job done”. I do not believe that the actions being proposed by the Government are sufficient to outlaw this scourge in good enough time. Our amendment will strengthen protections for consumers using logbook loans. I beg to move.
My Lords, before turning to Amendment 1 in detail, I would like to take a step back and set out why the Government do not believe that this Bill should be the vehicle for addressing issues in consumer credit and financial services more generally.
First, as noble Lords will be aware, the Government have introduced a major package of reforms to strengthen regulation of financial services markets. In the Financial Services Act 2012, we replaced the flawed system of financial regulation that we had inherited. We created the Prudential Regulation Authority to take the lead in ensuring that our banks and our insurers are safely and soundly run. We also set up the Financial Conduct Authority—FCA—as a consumer protection and market conduct regulator.
To ensure that the FCA has a clear and comprehensive remit covering all consumer financial services matters, we transferred the responsibility for regulating consumer credit from the OFT to the FCA. This means that the FCA’s statutory objectives, such as consumer protection, apply to the regulation of consumer credit. It also means that the FCA’s comprehensive and flexible rule-making powers can be used to help protect consumers from bad practices in the consumer credit market for the first time. For example, the payday lending rules introduced by the FCA have meant that the volume of payday loans has shrunk by 35% since the FCA took over regulatory responsibility in April 2014, demonstrating the strength of the regulatory regime. The Government therefore consider that the Consumer Rights Bill is not the place for making amendments to the law on consumer credit.
I turn to the detail of the amendment. Across government, we share concern about the risk to consumers from logbook loans, which were well described by the noble Lord, Lord Stevenson. The Government believe that people should be able to borrow and should have the tools to make an informed decision about which credit products are right for them but that consumers should be confident that they will be treated fairly when things go wrong. As I have said, responsibility for consumer credit regulation, which includes logbook lenders and the associated arrangements, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime.
Like payday loans, the FCA defines logbook loans as “higher risk activities”, as has been said, so lenders face closer supervision. Logbook lenders are subject to a range of binding FCA rules, including requirements to provide precontractual explanation to borrowers of their rights before any agreement is signed. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers.
The FCA actively monitors the market. It has flexible rule-making powers, and if it finds further problems, it will not hesitate to take action. Indeed, the FCA has said that it is,
“putting logbook lenders on notice”,
and that its new rules give it,
“the power to tackle any firm found not putting customers’ interests first”.
Moreover, logbook lenders are in the first group of firms to require full authorisation, with the FCA thoroughly scrutinising firms’ business models and practices. Every firm will have to demonstrate compliance with the FCA’s rules and principles, including the very important requirement to treat customers fairly. I assure noble Lords that this authorisation process, beginning next month, will have a dramatic impact on the size of the industry.
In addition to this robust action from the FCA, the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform the Bills of Sale Acts, as has been said. This legislation underpinning logbook loans is old, lengthy and incredibly complex, and affects businesses as well as consumers. Evidence suggests that around 20% of bills of sale are used by small businesses rather than individual consumers. As a result, the Government believe that the Law Commission is best placed to undertake a thorough assessment of how to bring this arcane—I think the noble Lord called it Victorian—legislation up to date. This project has been welcomed by Citizens Advice, and is now under way—it has started, so we are getting on with it. The Law Commission launched its call for evidence last month, which includes looking at the specific issues of how lenders take possession of vehicles and protections for third-party car purchasers, which we discussed in Committee.
The Government believe that this package of action will fundamentally strengthen protections for consumers using logbook loans. We have a combination of early action by the FCA and longer-term comprehensive reform. I therefore ask the noble Lord to withdraw his amendment.
My Lords, I thank the Minister for that very full and positive response. I am glad that she reaffirmed that the FCA is doing all it can in this matter and that the Law Commission, even at its somewhat leisurely pace, is going to be moving in on this area. Clearly the field is moving, and that is a good thing, but is it not the case that although the FCA can do all it can about companies, their balance sheets, their terms of trade and their operations, it does not have the power to make primary legislation, so it therefore cannot abolish bills of sale, nor can it require that any lending agreements should introduce court orders? We have a gap, a lacuna, between now and when the system kicks in, during which time the playing field is not level, the lack of a court order creates a significant imbalance between the consumer and the lender, consumers have fewer rights, and logbook loans will continue to cause severe consumer detriment. It is time to act. I wish to test the option of the House.
Clause 20: Right to reject
2: Clause 20, page 11, line 13, at end insert “, subject to subsections (19) and (20)”
My Lords, the Bill’s provisions on consumer contracts for goods build on existing legislation, such as the Sale of Goods Act, and on court- developed common law. Government Amendments 2, 4 and 6 are to ensure that the greater clarity the Bill provides does not override an existing common-law distinction between severable and entire contracts. A severable contract is divisible into parts, which are intended to be independent of each other, so different parts of the payment can be assigned to different parts of the trader’s performance. The amendments make it clear that, where a contract is severable, the consumer may have the right to reject those faulty goods or they may have the right to terminate the whole contract. That will depend on the nature of the goods and the fault and the details of the contract. In some cases, it will be quite right for a consumer to reject all the goods under a contract, even if it is severable. The existing common law recognises that and the amendments are to make it clear that the common law on this applies.
The noble Baroness, Lady Hayter, asked in Grand Committee whether these amendments could create a new incentive for traders to try to make their contracts severable. I hope I have given reassurance that the amendments refer to an existing concept. A contract will not be severable simply because it is described as such but will depend on the genuine agreement and arrangement between the parties in the circumstances. The guidance to the Bill will cover when a contract is severable and when a consumer might be entitled to terminate the whole contract. As I have explained, these amendments are to ensure that the consumer’s clearer rights in Clause 20 should not override the common-law position for severable contracts.
Clause 20 reflects the equivalent provision for Scotland in the Sale of Goods Act—that is, Section 15B—and in related legislation. Therefore, for Scots law, Clause 20 is intended to restate the existing provisions without altering the common law. I beg to move.
I thank the Minister for agreeing to give us some extra time to look at these amendments, which of course were not seen in the Commons or in the Select Committee. Having had time to consider them, and in particular with the reassurance that has now been given by the Minister and the clarity that will be in the forthcoming guidance on the Bill, we are content with the amendments.
Amendment 2 agreed.
3: Clause 20, page 11, line 23, at end insert—
“(7A) Whether or not the consumer has a duty to return the rejected goods, the trader must bear any reasonable costs of returning them, other than any costs incurred by the consumer in returning the goods in person to the place where the consumer took physical possession of them.”
My Lords, the Bill sets out key remedies for consumers but the Government recognise that it is also important that consumers are not discouraged from exercising them. These amendments relate to the costs of returning rejected goods to the trader. It is important that such costs do not put consumers off rejecting goods. We debated this issue at some length in Grand Committee.
We listened to the point made by the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, and agree that it does make sense to make it clear on the face of the Bill that the trader bears responsibility for the return costs. These two amendments provide that clarity and set a sensible balance. The trader is responsible for any reasonable costs of the consumer returning rejected goods. This would apply whether or not there is an agreed requirement for the consumer to return rejected goods. The amendments do not cover the costs of the consumer returning the goods in person to the place where the consumer took physical possession of them. We think that these are sensible amendments that meet the needs of consumers by making the law clearer without a causing significant burden to business. I beg to move.
My Lords, I am extremely grateful to the Minister for accepting the words that we used when we proposed the amendment the first time around. It does not happen very often; I will relish this experience. It is a curious irony that, in Committee, in the place where I had to sit in the Moses Room—I am sorry to take up the time of the Chamber in this way—the Minister responding was framed against the television on which, as noble Lords may now remember, those little swinging bells had just been introduced. It struck me that it was Christmas: it felt like Christmas. However, her words did not say, “Christmas”; they said, “No, go away; this is silly; this is already in legislation”. Now she has changed her mind and come back. I am so pleased.
Amendment 3 agreed.
4: Clause 20, page 12, line 14, at end insert—
“(19) Subsection (20) qualifies the application in relation to England and Wales and Northern Ireland of the rights mentioned in subsections (1) to (3) where—
(a) the contract is a severable contract, (b) in relation to the final right to reject, the contract is a contract for the hire of goods, a hire-purchase agreement or a contract for transfer of goods, and(c) section 26(3) does not apply.(20) The consumer is entitled, depending on the terms of the contract and the circumstances of the case—
(a) to reject the goods to which a severable obligation relates and treat that obligation as at an end (so that the entitlement to a refund relates only to what the consumer paid or transferred in relation to that obligation), or(b) to exercise any of the rights mentioned in subsections (1) to (3) in respect of the whole contract.”
Amendment 4 agreed.
Clause 21: Partial rejection of goods
Amendments 5 and 6
5: Clause 21, page 12, line 40, at end insert—
“(7A) Whether or not the consumer has a duty to return the rejected goods, the trader must bear any reasonable costs of returning them, other than any costs incurred by the consumer in returning those goods in person to the place where the consumer took physical possession of them.”
6: Clause 21, page 13, line 11, at end insert—
“(12) Where section 20(20)(a) applies the reference in subsection (1) to the consumer treating the contract as at an end is to be read as a reference to the consumer treating the severable obligation as at an end.”
Amendments 5 and 6 agreed.
Clause 23: Right to repair or replacement
7: Clause 23, page 14, line 36, after “Chapter” insert “—
My Lords, I was clearly sitting in the wrong place in Grand Committee, because I did not see any Christmas bells, and that is why I am returning to the fray on Clause 23 on behalf of the motor industry.
The amendment today differs from Amendments 20A and 20B, which were tabled in Grand Committee, by the addition of a new proposed subsection (9). This additional subsection would set a time period for completion of the process of repair to give the repairer the opportunity of a further attempt or attempts at repair. This directly addresses the concerns voiced by the Minister, my noble friend Lady Jolly, and, indeed, the Opposition Front Bench. My noble friend said in Grand Committee:
“The Bill is clear that a repair is an attempt to bring the goods into compliance with the Bill’s requirements. One repair is complete once the trader returns the goods to the consumer in response to the consumer’s request for a repair”.—[Official Report, 15/10/ 14; col. GC 118.]
For the Opposition, the noble Baroness, Lady Hayter, acknowledged that the repair need not be done “in one go”.
The purpose of this amendment is to clarify “one repair” in law, permitting a process of repair to take place. This is to address concerns from industry that the Bill as currently drafted does not provide traders of complex consumer goods, such as motor vehicles, a fair opportunity to repair. This is an issue because complex products may show a fault that requires more than one repair, involving, for example, more than one visit to a garage so that a car’s fault can be diagnosed and tested, and causes ruled out. In addition, a repair may appear complete, but the fault may reappear—as can be the case with electrical faults—and a second or subsequent repair may fix the problem.
My previous amendment regarding this issue, moved and withdrawn in Committee, met with concerns from my noble friend as it was thought that the consumer could become locked in a never-ending cycle of repairs. This revised amendment addresses this very issue while still giving scope for a process of repair to take place. This is through the addition of a determinable end-point for the process of repair, which would be commenced on the occasion that the consumer had to return to the trader for a second attempt at the repair. At that point, the trader would have to complete the process of repair within the requisite time, to be set down by the Secretary of State.
Traders need both flexibility and certainty in carrying out repairs, and consumers need the certainty that, if a process of repair fails, they can reject the goods and get their money back, subject to a deduction for use if it is after 30 days.
It is important to note that the amendment does not propose a fixed period within which a repair needs to be completed. If a consumer visits a car dealer with their car to have something repaired and the repair is successful, irrespective of how long it takes, as long as it is a reasonable time and does not cause significant inconvenience to the consumer, that is the end of the matter. However, if the car requires re-examining and further work to eliminate the fault, requiring the consumer to bring the car back to the dealer, at that point the dealer knows that they have a set period within which to complete the process of repair.
At the very least, my noble friend needs to amend the BIS draft goods guidance, which states at page 39 that, “The consumer only has to accept a single attempt to fix the issue with the goods by repairing or replacing the goods before s/he has a right to some money back”. This is completely inconsistent with the statement made by my noble friend in Grand Committee, to which I referred earlier. I urge whichever Minister is replying today to confirm that one repair may involve a process that requires the consumer to return to the trader with the goods on more than one occasion. I also urge the Minister to undertake to review the draft goods guidance—specifically the wording on page 39 of the current draft of 10 November.
I also take the opportunity to look forwards slightly to the Minister’s amendment to Clause 24, which has a bearing on this matter. The motor industry, through the SMMT, has told me that it supports the Minister’s Amendment 10 to Clause 24. It states that a deduction for use in the first six months would be permitted for motor vehicles and it removes the requirement for an active second-hand market. The industry acknowledges that this amendment may well encourage consumers to accept further repairs on a new vehicle rather than bear the cost of a deduction for use if they reject. However, in this instance, the trader would be reliant on the customer’s voluntary conduct in accepting further repairs. The industry believes that the Minister’s amendment alone does not go far enough in clarifying the law for consumers and traders alike on what “one repair” entails. Such clarification would increase certainty and protection for consumers and traders. I beg to move.
My Lords, my noble friend Lord Clement-Jones makes an interesting point about extending the law to allow multiple repairs beyond repair one but within a defined period of time. It is still not entirely clear what this time period would be. I noted that he said that it would be a determinate end-point of repair.
It is a laudable proposition but for the fact that it could put undue cost burdens on small businesses. I give the example of a local business selling a complex piece of machinery. It comes in for repair once and then on a couple of other occasions before it dawns on the trader that the repair is as a result of the customer perhaps not using it properly or misusing it. However, up until this point, it is the trader who by law, under my noble friend’s amendment, would bear all the costs of the transport and the re-repair.
Therefore, although the trader could make the sale contractual to pre-empt or prevent this, I believe that it is more proportionate and less prescriptive to retain the one-repair proposal as laid down in the Bill.
My Lords, following the discussion my noble friend Lord Clement-Jones described in Grand Committee, I recently met representatives of the motor industry to discuss their concerns about the issue of one repair and we had a constructive discussion that included other amendments. I am very pleased also to hear from the noble Viscount, Lord Simon, about his discussions with the motor industry and, of course, to see my esteemed predecessor, my noble friend Lord Younger, making a very good point about the costs on traders.
I understand—although I am not a huge fan of motor cars—that motor vehicles are very complex goods and there can be a tendency for faults to reappear after repair. However, a limit of one mandatory repair or replacement sets an important and appropriate balance. The Bill provides key simplifications, as we all know, which we expect to benefit both consumers and traders, including the motor industry. The Bill sets a 30-day period for consumers to exercise the short-term right to reject, whereas in the past, claims have been made in relation to motor vehicles some months after the car was bought. The amendments we have laid on deduction for use, which my noble friend Lord Clement-Jones referred to, recognise the particular nature of motor vehicles, being complex and subject to rapid depreciation. He also noted in Grand Committee that the issue of one repair is pertinent to the final right to reject. I am grateful to my noble friend for going away and amending his amendment.
To the extent that the Bill’s provisions regarding one repair may impact on the motor industry, I think that being able to apply a deduction for use in the first six months mitigates against that and is an important and complementary protection. I am not blind to the needs of the industry, but the revised amendments go too far. They would undermine both the consumer protection and the clarity that the Bill provides. The limit of one mandatory repair or replacement before a consumer is entitled to some money back follows consultation by both the Law Commission and BIS, both of which identified that approach as being the preferred option. The Law Commission recommended that there should be greater clarity as to when a consumer can move from repair or replacement to access some money back. The Bill’s one repair or replacement provision gives that clarity and I am concerned that it should not be undermined. Importantly, the Bill does not prevent the consumer from agreeing to further repairs. I think consumers—certainly a consumer like myself—tend to act reasonably with a motor trader, especially if they are treated reasonably in return. As long as the trader keeps them well informed I think most people would be willing to accept further repairs. If, however, the relationship breaks down, the consumer should, and will under the Bill, have the right to exit the contract if the trader has tried and failed to fix the fault.
I also feel that a time limit set by the power included in the amendment would fail to provide the necessary safeguard to protect the consumer fully. There is a real risk that such a time limit would become the default, leaving consumers stuck waiting. Without the certainty of being able to ask for money back after one failed repair, consumers would have to show that a repair process had caused them significant inconvenience or taken more than a reasonable time. While these are important protections within the Bill, we do not think they are sufficient alone for goods. This was the very issue on which the Law Commission recommended that there should be further clarity. The evidence submitted to the Law Commission’s consultation showed that it is unclear when the point of significant inconvenience is reached, allowing considerable scope for dispute.
All of these concerns are compounded by the fact that these amendments are so broad in scope. We believe that as drafted they could apply to all goods, even a table that needed more than one repair. Essentially, the amendment seems to cover both complex faults in simple goods and simple faults in complex goods. It would be unclear whether or not the consumer had to make the goods available to the trader more than once. It would also be all too easy for an unscrupulous trader to argue for repeated repairs—even on simple non-complex goods if they claimed that the nature of the fault justified it.
My noble friend mentioned guidance and perhaps, without commitment, I can come back to him on that issue.
Perhaps I can interrupt my noble friend to see what her reaction is before I respond. Does she accept that there is a conflict between what Ministers have been saying about the one repair concept and what is in the guidance? If so, clearly she could go further in undertaking that the guidance should be revised.
My advice is that there is no conflict, but as my noble friend has raised the issue, I shall certainly take a look and write to him. The amendments cut across the simple, clear provision set out in the Bill, so I ask my noble friend to withdraw his amendment.
I detect in a mild kind of a way that that is a no—a fairly firm no. The motor industry will be very disappointed by that response, and I thank the noble Viscount, Lord Simon, for his support. I am somewhat surprised by the noble Viscount, Lord Younger, because this amendment is heavily supported by dealers and manufacturers. It is designed for their benefit; it is certainly not designed to add to their woes, which I believe Clause 23 has the capacity to do. It will bear unduly harshly on dealers, in particular, but I recognise a stone wall when I see one. I very much hope that my noble friend will undertake to review the guidance on page 39 and the conflict between what on the face of it seems to be a completely contrary statement to what is in the guidance. Perhaps we can make progress in that respect. In the mean time I beg leave to withdraw the amendment.
Amendment 7 withdrawn.
Amendment 8 not moved.
Clause 24: Right to price reduction or final right to reject
9: Clause 24, page 15, line 40, leave out paragraph (a)
My Lords, I rise to move the amendment in my name and that of my noble friend Lord Stevenson of Balmacara, and to speak in support of others in this group. We will not be pushing our amendment to a vote as what it proposes and what our Amendment 21 in Committee asked for is now almost completely achieved in the Government’s Amendments 10 and 12. While it remains the case that a car salesman can deduct some of the price of a new car when taking back a faulty vehicle in accordance with its second-hand value, we are delighted that this will not apply to other faulty goods, which was our concern, and which the Bill’s original wording would have allowed.
I thank the Minister—there is a lot of that going on today—for considering so carefully our case made in Committee and for accepting perhaps 70% of it. It is a sort of advent present rather than a Christmas present but we are delighted with it all the same. I beg to move.
I thank the Minister for clarifying that she will be supporting Amendment 11 in my name, to which she has added her name, and moving her own Amendments 10 and 12, as we get to them. We will move our Amendment 11 in its place. I know that the Minister has put her name to it, but I think she will probably be moving Amendments 10 and 12 in their place. For the moment, I beg leave to withdraw Amendment 9.
Amendment 9 withdrawn.
10: Clause 24, page 15, line 40, leave out paragraphs (a) and (b) and insert—
“(a) the goods consist of a motor vehicle, or(b) the goods are of a description specified by order made by the Secretary of State by statutory instrument.”
Amendment 10 agreed.
11: Clause 24, page 15, line 45, leave out subsection (11)
Amendment 11 agreed.
12: Clause 24, page 16, line 12, at end insert—
“(13) In subsection (10)(a) “motor vehicle”—
(a) in relation to Great Britain, has the same meaning as in the Road Traffic Act 1988 (see sections 185 to 194 of that Act);(b) in relation to Northern Ireland, has the same meaning as in the Road Traffic (Northern Ireland) Order 1995 (SI 1995/2994 (NI 18)) (see Parts I and V of that Order).(14) But a vehicle is not a motor vehicle for the purposes of subsection (10)(a) if it is constructed or adapted—
(a) for the use of a person suffering from some physical defect or disability, and(b) so that it may only be used by one such person at any one time.(15) An order under subsection (10)(b)—
(a) may be made only if the Secretary of State is satisfied that it is appropriate to do so because of significant detriment caused to traders as a result of the application of subsection (10) in relation to goods of the description specified by the order; (b) may contain transitional or transitory provision or savings.(16) No order may be made under subsection (10)(b) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.”
Amendment 12 agreed.
13: After Clause 32, insert the following new Clause—
“Secondary ticketing platforms: seller profiles and ticket information
(1) Secondary ticketing operators must, on the website on which tickets are offered for sale or transfer, provide information concerning the sellers of tickets so that sellers may be easily identified.
(2) Information provided by virtue of subsection (1) must include, but is not limited to—
(a) the name of the seller;(b) if the seller is an undertaking, its registered number, jurisdiction of registration, registered office address, and if registered outside the United Kingdom, a valid address for service; and(c) the VAT registration number of the seller, if applicable.(3) Information provided under subsection (1) must be—
(a) accurate; and(b) prominently displayed before a buyer is able to complete the purchase of the ticket.(4) Secondary ticketing operators must disclose clearly and prominently where the seller of a ticket is—
(a) the secondary ticketing platform or a subsidiary undertaking or parent undertaking of the secondary ticketing platform;(b) a person or persons employed or engaged by the secondary ticketing platform;(c) other persons connected to employees, directors or shareholders of the secondary ticketing platform, or any of its subsidiary undertakings or parent undertakings;(d) the event organiser or an agent acting on its behalf;(e) any other party connected to the organisation of the event.(5) Where a ticket is offered for sale or transfer through a secondary ticketing platform—
(a) the seller must provide all relevant information about the ticket;(b) the secondary ticketing operator must publish all relevant information about a ticket in a prominent and clear manner; and(c) the secondary ticket operator must immediately remove the ticket from sale when it is informed by the event organiser that the information provided is inaccurate or incomplete.(6) Information to be provided by the seller and published by the secondary ticketing operator for the purposes of subsection (1) must include, without limitation—
(a) the face value of the ticket;(b) any age or other restrictions on the user of the ticket;(c) the designated location of the ticket including the stand, the block, the row and the seat number of the ticket, where applicable; and(d) the ticket booking identification or reference number.(7) Where tickets are being resold in contravention of the terms and conditions agreed to by the original purchaser, this must be stated prominently by the secondary ticketing platform at every stage of the purchasing process.
(8) Information provided by virtue of this section must be—
(a) accurate; and(b) prominently displayed before a buyer is able to complete the purchase of that ticket.(9) For the purposes of this section—
“secondary ticketing platform” means an internet-based facility for the resale of tickets to events in the United Kingdom of Great Britain and Northern Ireland, regardless of the jurisdiction in which the owner of the service is registered;
“secondary ticketing operator” means, in relation to a secondary ticketing platform, the person (whether incorporated or not) operating that secondary ticketing platform;
“ticket” means anything which purports to be a ticket, including any item, tangible or intangible, which grants the holder the right to entry to an event;
“event” means any sporting, music or cultural activity taking place at a specified time and place for which tickets are issued and required for entry or attendance;
“event organiser” means the person responsible for organising and holding an event and receiving the revenue from the event;
the term “undertaking” has the meanings given in section 1161 of the Companies Act 2006 (meaning of “undertaking” and related expressions);
the terms “subsidiary undertaking” and “parent undertaking” have the meanings given in section 1162 of the Companies Act 2006 (parent and subsidiary undertakings);
the term “person” refers to a natural person or a body corporate.
(10) This section will come into force no later than six months after this Act is passed.”
My Lords, I am grateful to the Minister for the time that she has devoted to this issue. She shares the passion for sport and the arts of the movers of the amendment and has spent many hours with the governing bodies of sport, as well as event promoters and colleagues hearing our case. Before I speak to the amendment, I will set out the scale of the problem and then address the current legislation, which I will argue has been proven to be ineffective. I will then explain the rationale for this amendment. At all stages, I will draw on the position taken by the Minister at Second Reading and in Committee and look to match the arguments so e1oquently made then by my noble friends Lord Clement-Jones and Lady Heyhoe Flint, the noble Lord, Lord Pendry, the noble Baroness, Lady Grey-Thompson, and the noble Lord, Lord Stevenson.
The size of the problem is well documented. I refer the House to an extract from the National Fraud Authority’s Annual Fraud Indicator of 2013—the National Fraud Authority was then the executive agency funded by the Home Office. The report states:
“Online ticket fraud £1.5 billion … Online ticket fraud occurs when victims purchase tickets for an event such as music, sport, theatre or a performance, which do not materialise. These tickets are often purchased from fake ticketing websites and through online auction and shopping sites … Research carried out by the OFT in September 2009”—
three years after the passing of the Fraud Act, which was meant to deal with these issues—
“identified that 1 in 12 of those surveyed admitted to being caught by scam websites. The survey also showed that about eight per cent were a victim of online ticketing fraud, having bought music, sport or theatre tickets from a website that appeared to be genuine … The NFA has calculated an annual fraud loss estimate using the prevalence rate identified in the OFT survey multiplied by an average fraud loss of £637 per victim identified by Action Fraud in relation to online ticketing fraud during 2012 … Based on this data, an estimated 2.3 million people fall victim to this type of fraud each year, resulting in losses of £1.5 billion”.
The Government are on record as saying that this is not a major issue. I would argue that £1.5 billion lost to consumers is a major issue requiring urgent action.
One can look simply at the evidence of the past 12 months and take some random examples. On 23 February last year, 80 people arrived excitedly at the O2 Arena to see One Direction only to find out that the tickets they were holding were not going to let them in. Of the 80 tickets, 40 were sold through viagogo. The next biggest source was Seatwave and the rest were bought through GET ME IN! and eBay. In July last year, Stuart Cain, head of ticketing at Birmingham’s LG Arena said:
“On a big show where there are a lot of e-tickets you can get up to 100 people a night affected”.
In November 2012, fans of Mumford & Sons were left disappointed after the tickets they bought from controversial secondary ticketing seller viagogo for a gig in Portsmouth turned out to be fake. I am sure that noble Lords will have examples from their own experience of this serious issue.
I turn to current legislation. There was all-party support and agreement with the International Olympic Committee to deal with ticket touting for the 2012 Olympic Games. Under Section 31 of the London Olympic Games and Paralympic Games Act 2006, it was an offence to sell a ticket or anything that purported to be a ticket for an event held as part of the Olympics or Paralympics in a public place or in the course of a business without the written authorisation of LOCOG, the event managers. There was no secondary market and a fine up to level 5 on the standard scale—some £5,000—for anyone convicted of such an offence. With all-party support in both houses, we tackled the problem of ticket touting by making the secondary market illegal. In 2011, there was further legislation. The fine was upped by Parliament to £20,000, again, with all-party support and no requirement for this latter measure from the International Olympic Committee.
What were the lessons learnt from the Olympics on this subject? My noble friend Lord Clement-Jones reminded us in Committee that the Metropolitan Police did a lot of work and reported through Operation Podium after the Olympic Games the need for an open and transparent system for ticket reselling with clear and appropriate regulations. Secondary websites, the Met argued, should be required to publish details of the ticket being offered including the original face value, seat number and location. They should identify the seller, state whether the seller has the permission of the originator to resell the ticket and declare whether the tickets have been listed by the event organisers. That was the position of the Metropolitan Police. The All-Party Parliamentary Group on Ticket Abuse recommended amendments to the Bill along the lines of those before the House today.
Our amendment addresses the reselling of event tickets usually, but not always, for profit. It specifically does not pursue the route followed, with all-party support, for London 2012; namely, the criminalisation of the secondary market while leaving the primary market completely unregulated. I believe that we need a secondary market. Everyone speaking to the subject in Committee emphasised the importance of an effective secondary market. There are often prima facie reasons why a “real fan” may feel the need to pass on a ticket. That includes the obvious scenario of when the purchaser has a spare ticket for which they cannot get a refund and so have no option other than to sell the ticket on the secondary market to recoup their expenditure. The Minister states that the consumers are protected by the Fraud Act 2006 and the Government have issued guidance on the 2013 regulations, specifically on tickets.
The Minister is also concerned that we would be regulating consumers. I agree with the Minister and would be the first to resist obtrusive consumer regulation. While it is wholly appropriate for, let us say, health and safety, it would not be here. That is why we propose, as your Lordships will have read, an amendment with a very light-touch approach which all genuine consumers should welcome for the transparency and empowerment that it would give them.
Just four, short, key facts are required. All that is now proposed is the name and location of the tickets and/or booking number, together with a tick box of whether resale complies with the terms and conditions. This takes about 15 seconds to type in—fractions of the time compared with what we have to go through to establish our profiles and register with a secondary selling site—but it gives the consumer the information he or she needs to check the validity of the ticket. Of course, it will not completely cease counterfeit activity but professional event organisers and all the sports governing bodies widely agree that this information will substantially reduce fraudulent activity in the £1.5 billion industry that is so damaging to consumers.
Having reviewed the Minister’s contribution to the early stages of the Bill, I believe that the Government may be unclear as to the distinction between a trader and a consumer. Surely anyone selling their £50 ticket for £500 on a website is no longer a consumer; they are automatically defined in law as a trader. It is not, as we have been told, relegislating. At present the information required in the regulations is only for traders and is only set out in guidance, not in the Bill. As I shall demonstrate, it is woolly, to say the least, and it is easily avoided. A review of thousands of tickets today on the online sites shows none complying with 2013 regulations. No one who has put their name to this amendment seeks to abolish the secondary market. We all seek to improve its operation in the interests of consumers, placing key best practice obligations in the Government’s 2013 regulations on the face of this consumer legislation.
I turn to the regulations on which the Government rely. I regret to say that you can drive a coach and horses through them. The fact that there is a £1.5 billion fraud market demonstrates that this is the case. As I have mentioned, the regulations apply only to sellers, who are defined as traders, and not to consumers selling to other consumers, as happens so often and is the business model for the secondary ticketing sites. Schedule 2 to the regulations lists the information you must provide to the consumer. Information on the main characteristics of the tickets and their total price, including delivery costs and other charges, must be given in a clear and comprehensible way before the consumer purchases the ticket. The main characteristics include—and here are the four key words, “if known to you”—the date and time of the event and its content; for example, who is performing. For a ticket associated with a particular reserved seat—say row A, seat 1—the seat number is a main characteristic that should be given to the consumer—if you know it. You do not have to find it out; you simply put it on there if you know it. That is fine, if you know it but, “Sorry, guv, didn’t know the date; sorry, guv, didn’t know who was playing; sorry, guv, didn’t know which seat it was or where it was in the stadium”. “I didn’t know” is a let-out clause as wide as the Blackwall Tunnel and as congested, full of unscrupulous ticket resellers. That is why the 2013 regulations are ineffective, as witnessed by their inability to impact the market and, in practice, are as good as being voluntary. That is why we need to address the £1.5 billion market that exists today.
One of the strongest arguments against the position that my noble friend took in Committee is that all the amendment would largely do is enforce what is currently set out in the guidance. It removes the loopholes that I have just mentioned and makes sure that it applies to secondary selling sites. If the Government feel that the guidance is sensible and required, it must follow that the Government cannot object to making the key elements of the guidance enforceable.
The Government argue that regulation of the marketplace is not needed, as these regulations provide effective legislation and that, if we legislate today, we would most likely push sales back underground and away from these legitimate marketplaces. However, as we are proposing only that four key elements of the existing regulations already approved by the Government should now be in the Bill, I can deduce only that the Government must believe that, if the regulations were properly followed, we would push sales underground. In other words, they must have been introduced to be ineffective. If so, we can only congratulate the Government on achieving this objective.
The amendment is supported by 300-plus sport and recreation organisations represented by the Sport and Recreation Alliance. It has the strong support of all the major sports governing bodies, from the England and Wales Cricket Board to the Rugby Football Union, from the Lawn Tennis Association to the Rugby Football League. If the House accepts the scale of the problem that I have outlined, the ineffectiveness of the current legislative approach and the vital principle in the Bill of protecting consumers, I hope that it will support the amendment.
We have had plenty of meetings, government reports, valuable reviews of the lessons learnt from the London Olympic and Paralympic Games, roundtables and consultation exercises. The Bill provides an opportunity for action on behalf of consumers, the many people who daily find themselves to be the victims of market abuse, the sports fans who turn up at the Ryder Cup in Gleneagles to be turned away, and our children and grandchildren who go to music festivals to be turned away. The amendment would go a long way to reduce a massive problem. It is absolutely clear that regulating the secondary market is fundamental to stopping ticket crime and abuse. I beg to move.
My Lords, once again, I return to the subject I raised at Second Reading and in Committee by speaking to Amendment 13, to which I have added my name. I also have to declare an interest to the House: I am a board member of the England and Wales Cricket Board.
Like so many of my colleagues on both sides of the House, I want the very best for sport and entertainment and their fan bases. I make this address feeling a bit like Mrs Echo of my noble friend Lord Moynihan. As the House has heard, this is a redrafted amendment. It is shorter, sharper and has absolute clarity. It is designed to empower consumers by placing extremely light requirements on the reselling of tickets. Crucially, it does not in any way prohibit or ban the resale of tickets. It seeks to replicate the standards that the Government intended—I stress the word “intended”—to introduce through the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.
Frustratingly, the regulations are not working at all. I have now studied many online ticket sales sites, as have the major sports groups mentioned by my noble friend Lord Moynihan. We can find no sales at all complying with the stated regulations. In meetings with officials working for the Minister, they, too, have been unable to cite evidence of the consumer contracts regulations having any effect. The regulations are clearly ineffectual. That is why I plead from my sporting heart that we need the amendment. It clarifies matters by placing in legislation key characteristics that must be provided by the seller when a ticket is resold, rather than the existing vague guidance and confusion about what constitutes a trader and what constitutes a consumer. That creates a huge loophole that can be exploited by the unscrupulous leading to, as my noble friend Lord Moynihan said, a £1.5 billion racket.
I hope that all sides of the House will support me when I emphasise what we are trying to achieve. Those who buy a ticket from a secondary seller should be provided with the same information and protection when they buy that ticket as they would expect to receive when purchasing direct from the event organiser. It is as simple as that. But you would not think so, judging by the anguish that sports governing bodies are having to suffer in seeking a satisfactory resolution with this amendment.
If the amendment is made, every purchaser will be told the original face value of the ticket, the location of the seat in terms of block, row and seat number, whether it has restricted vision, and whether it is a seat for a child or senior citizen being sold at what I think is called a top-whack price. It will also allow people to check with the venue that the ticket is genuine. Importantly too, they would be told the original terms and conditions relating to the ticket purchase, and whether the resale was in breach of those original terms and conditions.
As has already been said, it takes only a matter of seconds to provide this information online. Remember that anyone who sells online has to create an account with a secondary seller or website in any event. This is an infinitely longer process than just providing three key details when selling a ticket. If you are extremely modern, you could even take a photo of the ticket and upload it.
Those facts are material for the consumer in making an informed decision about whether to purchase a ticket. I assure the House that this is not an unnecessary burden— and it would certainly not seem like a burden to the 150 or so very angry fans who were refused admission to the Ashes test at the Oval two years ago because they had been sold invalid tickets online. Club officials were angrily confronted, and are probably still recovering from the onslaught, but they had no armoury in legislation to solve the problem. In some circumstances there is no block, row or seat number. That is why the amendment offers the alternative of citing the seat booking reference number.
If the Government intend to continue to defend a status quo that is patently failing, I have three questions for the Minister. First, does she accept that the amendment, if accepted, would place very little burden on the seller? Secondly, why does the Minister not agree that is important to empower consumers by giving them key information about the tickets they have bought, and to protect them from being mis-sold or, even worse, turning up at the event and not being admitted because the terms and conditions have been breached? Thirdly, does she accept that the 2013 regulations are not working, because they rely on guidance alone and are too imprecise about how a trader is defined? Surely individuals who buy tickets with the sole aim of selling them on at inflated prices to make a profit are trading, so should be classed as traders.
I am sad to tell the House that there are very many people doing just that. Only yesterday I went online to research the issue. Across the sites of major secondary sellers such as viagogo, Get Me In!, Seatwave and StubHub—they have been vigorously lobbying against the amendment; well, they would, wouldn’t they?—I found more than 5,000 tickets being sold for next summer’s Ashes test series. This is flabbergasting. These tickets have only just gone on sale. It is inconceivable to me that such a large number of tickets have been bought by consumers who now find, eight months in advance, that they cannot go to the tests. How very strange and coincidental is that? These tickets are being hawked around for profit. Every single one of them is being sold in breach of the 2013 regulations, because they have been put there by opportunistic traders, colloquially known as touts; they are not put there just for fun, or by individual consumers exploiting the system. It is naive to think otherwise and to believe that those actions are acceptable.
Is this how we want to showcase our international sports and entertainment events in this country? Is this how we want to go about protecting a nation of sports fans? Before us is a Bill about consumer rights, so please let us give those consumers the right to know that what they are buying is genuine and is what it purports to be.
I have in the past been regarded as a rebel with a cause in fighting for fairness in sport. Speaking in support of this amendment, I am once again revealing my rebellious nature—old habits die hard—but I am merely seeking fair trading for all. I hope that the Minister is now ready to accept this amendment or at least prepared to offer some room for negotiation before Third Reading. The MCC’s “Spirit of Cricket” project, which engenders fair play, should be adopted for secondary selling of tickets so that all consumers are protected from those who seek to prey on their enthusiasm and desire to acquire genuine tickets.
My Lords, as the third signatory to the amendment and as someone who tabled amendments in Grand Committee, in the face of the superb introductions by my noble friends Lord Moynihan and Lady Heyhoe Flint, I intend to be extremely brief. I bow to the knowledge, expertise and passion which they bring to the amendment today and I will simply emphasise four points.
First, this amendment is not intended to create a ban on secondary ticketing and would not do so in practice. It is not designed to inhibit the legitimate exchange of tickets on secondary platforms. The target of the amendment is those who are using the lack of transparency to mislead or defraud consumers; it will benefit all those wishing to buy tickets on the secondary market.
Secondly, as my noble friend Lord Moynihan said, some of our biggest national governing bodies of sport, such as the FA, the ECB, the RFU and the LTA—I am sorry about the initials but there are plenty of them—as well as the organisers of events such as Wimbledon, England 2015 and the London Marathon, are calling for this because they believe that their consumers, the sporting enthusiasts, are being harmed by the lack of transparency in the secondary market.
Thirdly, as has been very clearly illustrated, the current consumer contract regulations are too narrow and capture only traders. Yet no one selling on the secondary market identifies themselves as a trader. Furthermore, as my noble friend Lord Moynihan said, the obligation to list the main characteristics applies only if they are known. I thought that “Honest, guv” was an extremely good way of putting it. They can say, “I don’t know the characteristics or the ticket number”, and so on. The consumer contract regulations are pretty ineffective. It is quite clear that none of the main ticketing platforms has put anything additional on its website as a result of them, so in that sense they are completely ineffective. Of course, as my noble friend Lord Moynihan pointed out, there is a minimal amount in the regulations themselves; the rest is in the guidance, which is not binding.
Fourthly, my noble friend Lady Heyhoe Flint gave us a number of illustrations. There is a very recent illustration from the rock world with the Fleetwood Mac tour. Something like 12,000 tickets for that UK tour are available on the secondary websites. Have all those enthusiastic Fleetwood Mac fans really decided, having bought those tickets in the first place, to put them on the secondary market because they are washing their hair one day? That is a completely incredible scenario and it only illustrates the need for far greater transparency in the ticketing world. I very strongly support the amendment.
My Lords, I declare a total lack of interest in the sense that I neither buy through the internet for sporting occasions nor for the sort of musical occasions of which we have heard involving various persons with attractive names. However, somebody ought to speak in this debate on behalf of normal customers, who do not happen to have a big enthusiasm for it. However, I do have an enthusiasm for honesty and straightforwardness and I start by saying that if it were good enough for the Olympics, why the blazes is it not good enough now? The Government do not have a case because if they needed to do that to protect Britain’s reputation for the Olympics, they need to do it to protect Britain’s reputation for every other sporting activity and the like. That is the first thing and it seems perfectly obvious.
The second thing is that what is recommended here is something I have long wanted—this I do have an interest in—as far as internet control is concerned. I am entirely in favour of the freedom of the internet, but I remember that when we got rid of censorship of newspapers in Britain, the one rule we kept was that every newspaper should carry on its front the name and address of the publisher so that there was a mechanism whereby people could properly discover the truth, the connections and the like. That is what I would like to see throughout the internet so that people could no longer publish, without any kind of reference, material which might otherwise cause them to be found to be fraudulent or incorrect. In this circumstance, there is such an open-and-shut case to do this that we ought to do it.
The third reason is this: the digital world moves very fast; the Government move very slowly and Parliament moves at a snail’s pace, so if we do not take this measure now, we will have to wait not just for weeks or months, during which time the digital world may have entirely changed, but, as always, until it is too late. If ever there was a case of stable doors—although that is a bit out of date as far digital affairs are concerned—this is it. We have to move fast, and we have to be able to move fast.
My fourth issue is the argument that says that we do not want any more regulation. I always find this a very difficult argument because I am in favour of good regulation and deeply opposed to bad regulation. So I have a suggestion for the Government: if they do not want this, I suggest that they put down an amendment to get rid of the 2013 Act because if it does not work, why is it on the statute book? It seems to me to be otiose regulation. If we are in the business of reducing regulation, this is a perfectly good thing to do. Let us repeal the 2013 Act. Then we will get another tick in those boxes and everybody will be happy.
However, if the Government think that that piece of regulation is important and good, all we need to do is improve it. I suggest that the improvement before us today is ideal because it is very light touch. I thought that the Government were in favour of light-touch regulation, and this is light-touch regulation. What it says is that if you wish to sell a ticket, you have to provide the information that, first, the customer needs, and secondly, if you are genuine, you have. If you are not genuine, you do not have it, so it is jolly difficult to provide it. Yes, it is heavy legislation for the crook, but it is easy legislation for he who is not a crook, so therefore this is light-touch regulation.
I come on to the argument that we need a secondary market. Yes, we need a secondary market, but we do not need a fraudulent secondary market. The whole purpose of this is to make sure that we have a secondary market which is not fraudulent and therefore people are more able to use it. I want them to do so. I have admitted to not being a huge fan of Fleetwood Mac—although I am more a fan of them than some other groups—but I go to a lot of concerts and to the theatre, the ballet and the opera a good deal. When we have got an extra ticket because we thought that one of our young or somebody else was going to come there have been occasions when we have wanted to return it, and a mechanism for doing so is a very good thing. I do not want anything to stop that, but this is not stopping that. Indeed, it is making the system work.
If I may dare say this to the Government, regulation often makes the system work, where not having regulation makes it not work. That is one of the things about good regulation, and there is a distinction between good regulation and the sort of nonsensical regulation we heard about earlier today. Liqueur chocolates! The idea that we should have a rule that says young people cannot buy a liqueur chocolate—I realised then why I was not a socialist. There are moments when I wonder, but on that occasion I saw why it was.
People who actually think that you should regulate liqueur chocolates ought to stop and realise just how stupid they look. The result is, of course, that when you want to do something sensible, people who do not like the regulation of liqueur chocolates say, “There you are, there you go again”. I am trying to suggest that sane and sensible people do not regulate liqueur chocolates but do regulate the online purchase of tickets. That seems to me to be a moderate, reasonable, sensible, right-of-centre way of proceeding, which those on the other side might join in, just for the ride, if I may put it like that.
I am sorry to interrupt the noble Lord but I want to point out two things. First, the noble Lord spoke warmly about newspaper proprietors and what a wonderful thing it is that we have a rule in this country that editors should always be named so that they can be sued for libel. That has just been deregulated. Secondly, it was a Conservative Government who introduced the requirement to regulate chocolates.
There may be regulations which, when people did not do it, you need. I think that if the Daily Telegraph took its address off, we would be able to find it. We would not be in too much difficulty with newspapers today. The problem here is that these websites are in the same position as newspapers were in those days, when there were a very large number of them, they were run off by hand and people did not know whence they came. I think that that explains the difference between now and then: the world changes and it moves quickly. I used the example of liqueur chocolates because it was always silly to have liqueur chocolates under the rules. I do not know which party proposed it, but whoever it was should be ashamed.
I finish with the real reason I wanted to stand up and talk about this. Britain is increasingly the centre of a very large tourist trade. London is the only world city, in a real sense. We have the glory of the most diverse society with the most wonderful opportunities. We should be saying, every day, “Thank goodness we live in this great country and in this great city”. Therefore, we must ensure that we protect the brand. I do not want to be vulgarly capitalist, but let us protect our brand.
I want us to be a major force in the European Union, where we are properly at home, but I want people coming from the rest of the European Union to feel that we protect them when they buy tickets here, when they buy them from abroad and when they come in from the EU and beyond—I want our American and Australian friends to feel that they can do this safely. The Government have a very simple way of doing this, which is to accept the amendment. I very much hope they will.
My Lords, in supporting the Government on this amendment I feel a bit like Pietersen, the cricketer, taking on the cricket establishment, but since I have always admired his bravery and foolhardiness, I shall have a go. I think there is a dangerous presumption in this debate that the secondary ticketing market is a bad thing and that people would like to do without it. Balancing that, I accept, there is a genuine belief that by increasing regulation, by demanding more information, we will eliminate fraud. I think that approach is misguided. I do not think that you necessarily end fraud by increasing regulation.
The secondary ticketing market fulfils a very useful purpose for people, particularly those who buy tickets and are often made to buy them a year ahead of the event. When they do not want to use them, they can dispose of them appropriately; 70% of people buying tickets want that secondary market to continue. We should be supporting recognised and established brand leaders that work in this market and do all that is required. They guarantee their tickets, and people should use them; we should encourage more people to use those established brands. If they did that, the market would work better; that is how to attack fraud.
If you are attacking fraud, where else do you look? You look first of all at the computer-operated systems that enable people to buy mass tickets. That is where you ought to direct your attacks, and there are some encouraging signs there. But you also need to question the sports operators. Too many of them are greedy. They give their tickets to people in hospitality, who then do not need them and try to dispose of them through secondary markets. If the sports operators want an improvement, the first thing that they could do is to improve the affordability of their tickets, so they are not forcing the price up, which encourages this sort of fraud.
Ticket sellers are already subject to the regulations, as we have heard. Is it a good Conservative or Liberal principle that, if the regulations are not working, you add to them? Surely you question them. Are we really saying that just adding a name to a ticket will eliminate fraud? I do not believe that either. We should encourage established secondary sellers, so that they can help us to undermine the bad sellers of tickets—the touts, if you like. Online selling and ticketing is actually a huge improvement in terms of control on the old idea whereby tickets were sold by street traders. So instead of having an emotional look at this issue—and I accept that there is a lot of emotion about it—we should look at it frankly and in great detail to see what we are doing here, rather than adding to regulation that is not working and not actually looking at the real areas where fraud is being perpetrated.
My Lords, I agree with much of what the noble Lord, Lord Stoneham, has said. I was unable to be present for that part of Committee that focused on the emotive issue of secondary ticketing, but I have read Hansard, and my first point is that I have some sympathy in reading the anecdotes and anomalies raised, notably by the noble Lords, Lord Stevenson and Lord Clement-Jones, as well as my noble friends Lord Moynihan and Lady Heyhoe Flint, among others.
I admit that there is a range of frustrating issues over the sale and resale of secondary ticketing, which have been cited. I also note that the noble Lord, Lord Pendry, is in his place; he noted in Committee that these matters have been debated over 20 years, which shows that they are not easy. I was pleased to meet my noble friends Lady Heyhoe Flint and Lord Moynihan to discuss these matters, when in my role on the Front Bench, so I am aware of many of the issues.
I start by stating the obvious. As a principle, we should not legislate or regulate when either there is existing regulation in place—and I note the comments from my noble friend Lord Deben that that means good legislation—or there are solutions coming from the market. The question is whether safeguards are in place and whether they are being utilised. In the case of business-to-consumer sales of tickets, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out clearly as a list what information must be provided on tickets. There are more than 20 pieces of information requirements to which the consumer has access, and there is guidance for consumers on how to apply them to tickets. If there is a breach, the whereabouts of your seat is important—for example, if you are unexpectedly placed behind a pillar when you are watching a cricket match. Here you have redress under the Consumer Protection from Unfair Trading Regulations 2008. Other potential breaches can come under the Fraud Act, as mentioned today, as an offence. The sanctions including fines or imprisonment are in place. Given the comments of my noble friend Lady Heyhoe Flint about the law being ineffectual, I would however ask the Minister if it would not be a good idea to do more, such as better publicising the sanctions and advertising warning notices for those traders, or traders posing as consumers, who might be minded to commit such offences. Of course, more offenders caught will act as a deterrent—or should do.
The CMA and Trading Standards have an important role to play in regulating this area, but I do not believe that more legislation is necessarily required. With regard to consumer-to-consumer sales, some Peers have made the point that, despite the frustrations for some event organisers of not having a reassurance that tickets sold stay with the original purchasers—those who would otherwise attend the events—the advantages outweigh the disadvantages. If someone cannot go to a concert or sports fixture, because, for example, there is a death in the family, then it surely makes sense for them to sell the ticket on at whatever price is negotiated with whomsoever they wish. Seventy per cent of consumers agree with this principle. It is therefore an open negotiation between two parties. Of course, however, in listening to the arguments, I admit that this can be taken to extremes.
The main argument taken up in Committee, and also mentioned today, is that tickets can be sold en bloc from the originating ticket seller to an individual or individuals who then sell on for profit to other people. The point has already been made. I agree that this should not happen—it is not in the spirit of the production, or match. The originator has the technological means to stop this, which is a point very strongly made by my noble friend Lord Stoneham, and controlling ticket sales better by this means is the way forward.
The danger is that if there was too much legal intervention, there would certainly be a black market for tickets which would inevitably grow with time. In conclusion, I believe that a voluntary approach with improved guidance and with better point-of-sale electronic means to control ticketing is the way forward.
My Lords, it is such a shame when a fan of sports, or theatre, or music, has their enthusiasm exploited, and is ripped off. But I do not think that the amendment would do what it intends to do. It is designed to allow sports grounds to cancel tickets not sold by them. When people hear of a secondary market, they think of shady touts selling fraudulent tickets on the street corner. They think of sportsmen, officials or media pundits who are offered freebies, and then choose to sell them at inflated prices. These things will not be stopped by this amendment. They are not what proper secondary markets are about.
A proper secondary market will allow people to trade tickets among one another; to allow supply to meet demand, with the market doing exactly what it is supposed to do—arriving at the right price for both parties. Using a safe secondary market on the internet is safer than using a tout. If someone were to purchase a ticket for an event, and closer to the time realised that they could not go, then it is only fair that they should try to find a buyer for the ticket. If information such as seat numbers, transaction numbers and the names of sellers is required for resale, then sports governing bodies or theatres could cancel the tickets without a refund. So the person who bought the ticket originally would be out of pocket. Then the incentive is there for sellers to lie about their name.
With this amendment, we will find that Mr D Duck is a top ticket dealer. Or the seller may even list an adjacent seat number. Imagine the problems that could be caused when the wrong seat is cancelled. If your ticket was cancelled because a tout said he was advertising it, you may eventually get a refund after a struggle—but you will certainly miss the show.
Someone hoping to sell a ticket could also just try to sell it on an offshore site—or indeed sell it to those malicious touts outside the venue, helping to fuel more fraudulent activity. However well intentioned, I think this is one of those laws that will make sensible people do silly things. People use secondary ticket markets quite happily as they currently operate. The majority of users want a safe space to resell tickets online. People are very concerned about privacy online too. They know that scammers are out there looking for personal information such as names and addresses. Asking for this level of information for an online secondary market will worry users.
When we hear about the astronomical prices quoted for a ticket, quite often in newspaper reports, they are usually just the advertised price. That does not mean the ticket will sell for that much. Buyers are as canny as sellers. They know that they can wait for a while, until the date of the show gets nearer, to see a drop in the price. Again, this is the market determining the right price between grown-up consumers. And why do we not celebrate high prices? Surely this just shows that the lucky fans who purchased at face value have got them themselves a bargain.
We have seen what it is like when there are no secondary ticketing markets in the UK. The Olympics were a success in so many ways, but it was disappointing to see banks of empty seats at many exciting events. It was a condition of our bid for the Games that there was no secondary market and the results spoke for themselves—empty seats. We should also look elsewhere to see if another country has introduced these kinds of regulations, and what the effect has been.
In France, the legislation seems to have had little impact, and has done exactly what I alluded to earlier—sellers have moved to selling tickets on offshore markets. Canada and states such as Michigan have introduced legislation like this, and then had to remove it. There is a thriving secondary ticket market elsewhere in America—for baseball games and American football matches. The prices are wildly different at times, and they simply reflect the demand for a ticket. You can get a ticket to a baseball match starting that same afternoon for less than $10. But a big football match is likely to be more expensive on the secondary market. Overall, though, transactions are safe and demand meets supply. We seem to be five years behind in considering legislation like this. So we should take this opportunity to make sure that we do not follow bad examples but copy good ones.
I rise briefly to prove that we on this side of the House can also have fun and go to concerts and rugby and football matches. I want to support those who tabled the amendment—obviously my noble friend has yet to speak. I believe that this is a very sensible but extremely light-touch proposal—it is feather light. We are not asking for criminalisation, as in the case of the Olympics. We are talking about the point that the noble Baroness, Lady Heyhoe Flint, made demanding equality of treatment for consumers of both original tickets and secondary tickets. That is a very simple demand to make in this extremely light-touch amendment.
I support the noble Lord, Lord Moynihan. I have a number of interests in sport, which are declared on the register. We might be here a long time if I went through them all.
We have been discussing this for longer than I have been involved in sport—and that is at least 30 years. As an ex-athlete and a sports fan, of course I want people to be watching and supporting. It is important to say that this is not a ban on secondary tickets; it would not be so in practice. This is about those people who hide behind the lack of transparency to mislead or defraud.
We should not take lightly the number of governing bodies which are in agreement on this issue. Again, in the length of time I have been involved in sport, it is very unusual for so many to agree on a single issue. They believe in this because they feel that it is very harmful to what they are trying to do. This is a pragmatic step that empowers consumers. It will not inhibit the legitimate exchange of tickets on secondary platforms. It will just make government policy much more effective.
I would like to come back to the point of the noble Lord, Lord Borwick, on the Olympics and the Paralympics. It was briefly in the media about seats not being filled, but my understanding was that that was part of the contract with the IOC: it was IOC members who had to have those seats available if they wanted to watch the sport. It was not a case of tickets that had been sold and not used—it was a very specific area. Every Olympics and Paralympics Games have to set a number of those seats aside. I feel slightly embarrassed talking about that with the noble Lord, Lord Deighton, in the Chamber. He was much closer to it than I was.
With the Olympics and Paralympics, the legislation that was in place meant that people felt very confident, knowing that when they went to events they would get tickets. I have been to events where I have seen parents standing outside, explaining to their 10 year-old why the ticket they have is not valid. They might have paid over the odds for it, but the pressure from children to see One Direction and all those other people is huge. As a parent you might pay more, because you want to give that experience to your child. You do not spend lots of time checking out different methods of buying tickets on the internet; you buy the ticket because you want to be there. This is about protecting those people and making sure that they know that those seats are protected.
This is pragmatic. Nobody loses out from this proposal apart from those who seek to make huge profits by mis-selling or defrauding consumers. I strongly support the work that the noble Lord, Lord Moynihan, is doing in this area, because it is vital that we do this.
My Lords, I will start with a couple of apologies. The first is for arriving a few seconds into the speech of my noble friend Lord Moynihan. That was partly to do with the excellent speed of the Minister in marshalling us through this, while simultaneously being due to a slight go-slow on the part of my guide dog in getting here this afternoon. I also apologise for not being able to speak to this amendment in Committee; it was my birthday, and I wrongly prioritised a celebratory dinner ahead of speaking on that occasion.
What are we trying to achieve with this? It is not complicated; it does not say anything negative about the concept of a secondary market for tickets. It is simply about this: if we can improve, we will get more tickets into the hands of more sports fans for more events, and we will drive a far more efficient ticketing operation across sport, art, culture and music.
In Committee, the noble Lord, Lord Stevenson, raised a very important point: what is a ticket? That question was not taken up by the Minister on that occasion, so I will tempt her this evening into perhaps going into it in her response, because it is a key point. If we are talking about tickets, it makes sense for us to consider what a ticket is, and crucially, off the back of that, it seems reasonable to consider what a ticket could and perhaps should be. That involves consideration of the physical, the electronic ticket, its commercial and legal characteristics, and what is set around it as regards transferability and negotiability. It seems to be quite sensible to think, debate and discuss all those elements so that we are all clear as regards what we are talking about.
If I am lucky enough to get a ticket for Centre Court at Wimbledon, but then a week before I am struck down with a late spring flu, it seems perfectly reasonable and absolutely right that I should be allowed to resell that ticket to somebody who was not lucky enough to get it in the primary sale. Similarly, it seems absolutely reasonable that I should not be able to make a profit on that ticket, and should be able to get back only its face value. Even more so, if from the outset I pitched into the ticket market with no intention of going anywhere near Centre Court and SW19, it seems absolutely reasonable that there should be no proper purpose in the deriving of profit from that purchase.
The ticket is not a piece of real property; it is a licence—an opportunity. It is the chance to sit on one of those hallowed seats at Centre Court, not something to put away and deal with as if it was some property that can be sold to the highest bidder, who perhaps has nothing to do with sport.
At London 2012 we probably had the most discussions around the senior leadership table about ticketing, because it matters. We knew that whatever we did, most people would not get one of those tickets to the greatest show on earth. We had to be absolutely clear and robust in how we structured that ticket offer so that, even if people were unlucky and did not get a ticket, they could at least see exactly what we did at every stage and see that it was transparent, fair and that there was no secondary market.
The only mistake we made in the athletics stadium was in not making the stand on the home straight able to seat 2 million spectators—because that is how many people applied to get a ticket to see the Bolt man run 100 metres. Two million people wanted that ticket, which is why the ballot made sense, and why we were effectively, through legislation, able to have a market that delivered tickets to sport fans. We drove revenue, got fans in front, and not one illegal counterfeit ticket was recovered or recorded at any of our Games venues. There were no sheepskin jackets or greased-back hairdos, standing in groups saying, “I’ll buy or sell”. We see those kinds of things at football, cricket, rugby and music concerts up and down this country, and they are replicated online in not much a better way.
We have so many reasons to consider this today. In many ways, sport, art, culture and music are what it is to be British.
There is no question that in the amendment’s intention it goes to the heart of what we need to do, but compared to the Olympic and Paralympic legislation, as noble Lords have already pointed out, it takes only a tiny step. However, alongside that, sports organisations can take steps in the primary market. In a digital world, botnets are easy to eradicate. Botnets begone! Sports organisations can do a lot in the primary market to eradicate a lot of the difficulties we see in the secondary market. Similarly, one could argue that sport could establish a secondary market for tickets, so that a condition on the ticket means that the only place that it can be resold is on a sport exchange—a sport secondary market platform where it can be sold only at face value. That is a thought; it is not a point for today; but it shows that this debate is wider than the amendment, which has absolutely the right intent at its heart.
It is right that we consider this today, because if sport, government—everybody—can work together to make this right, we can get close to eradicating the bad, celebrating the good, and getting tickets into the hands of sports, music and theatre fans right across the country. I put it to the Minister that we have 1.5 billion reasons to consider this extremely carefully this evening.
My Lords, this has been a marvellous debate. I have heard so many wonderful, emotional things, and now I have to pull myself down and say, “Actually, fraud is already illegal in this country; we do not need any more law—we have enough of that”. We need what we have heard about today from my noble friends Lord Stoneham and Lord Younger of Leckie. The secondary and primary movers in this area need to improve access, and need to do what we need to do for consumers all the time.
What a consumer needs more than anything, first and foremost, is choice. Secondly, we need access to the choice—where do I get the ticket? Do I get it from a reputable source? Therefore we need a choice, access to it, and information about it, all of which has been described here today. I am talking about facts that we have known about for ever. Trading standards has already spoken; it stands for the same six rules for consumers. We want equity; we want it to be fair; and at the end of all that, we want redress. If it goes wrong—if there is cheating—we need that. If we push this underground by trying to tinker with the legislation we already have, then we will have no way of helping the poorest, the least informed or the most overexcited, who will not get their money back and will not get anything. It is stupid to even consider doing it: this is an emotional appeal. I can imagine that on sports tracks it all sounds wonderful, but if you want to get the job done right, the answer is to do it the other way: get the sports operators and the secondary markets right so that we can read about it and understand what we are doing so that no child turns up with a ticket that is a wrong ticket. We will not do it by trying to reinvent the law. We already have a law of fraud.
My Lords, I declare an interest as an occasional West End producer who tries to flog a few tickets here and there. The secondary market has been with us for many years. I well remember in my youth assisting in a Royal Variety performance and my job was to get the artists lined up on the stage to be greeted by Her Majesty after the performance. I stuck particularly close to the late and rather wonderful Tommy Cooper, who was somewhat uncontrollable; he was told very clearly—as all the artists were—not to speak to Her Majesty until the conversation was opened by her good self. Of course, however, as Her Majesty approached Mr Cooper, he jumped in and said, “Your Majesty, do you like football?”. Her Majesty replied, “Actually, not terribly, Mr Cooper”. He said, “Can I have your Cup Final ticket?”.
Whether this is an early example of the secondary market, I am not sure; but what is clear to me from listening to this debate is that the secondary market is alive and well and needs to be encouraged. The proponents of this amendment are seeking not to attack the secondary market, but to encourage it and legitimise it, and to help the sports bodies and promoters who create the events for which there is demand for tickets to manage them so that there is not £1.5 billion-worth of fraud. This is an attempt to attack tickets that do not exist; it is not an attempt to attack the secondary market. There is clearly a very serious problem here: people are being defrauded; the law is clearly deficient. If the Minister sets the Government’s face against this amendment, it is incumbent on them to acknowledge that there is a problem here and come forward with a solution of their own. This is easily the best solution that I have heard; it has the support of the people who create the events and have the interests of their consumers at heart. I sincerely hope that the Government—if they are unwilling to accept this amendment—will come forward with proposals of their own to deal with the £1.5 billion-worth of fraud that has been going on too long.
My Lords, I echo the words of those noble Lords who have said that this has been a very good debate: it has indeed been good and it is right that it should have been, because it raised difficult issues with which the Government have been grappling. The predominant weight of the arguments that we have heard today—because they were not universally on one side—was for change, so I hope that that will weigh heavily with the Government when they come to consider what they are going to do.
I had a full speech here, full of witty aphorisms and wonderful evidence, but you always find that in debates of this nature, somebody stands up and says, “Do you know, just about everything that could be said about this thing has been said, but not by everybody,” and then they repeat them. I am not going to do that. The issue on which I want to reflect is what on earth the Government are going to do with this. When you have had your case as put in Grand Committee completely destroyed by the forensic words of the noble Lord, Lord Moynihan; when you have had your best arguments bashed to boundary by the noble Baroness, Lady Heyhoe Flint; when you have reduced the noble Lord, Lord Clement-Jones—and it is an astonishing thing—to speak for less than three minutes in a debate; when your former Secretary of State is lining up to give you good advice about how you should deal with this, then you are in a spot of trouble.
You know you are in trouble when you have to rely on people on the other side who are basically scaremongering. I respect the noble Lords who have spoken in support of the Government on this matter, but I think they went way over the top, while we on this side were utter models of restraint. We insisted on only two things: that the equity that should exist for anybody who wishes to buy tickets is not abolishing, changing or adjusting any market; I thought that the noble Lord, Lord Grade, made that point very well, and it was previously made by the noble Lord, Lord Holmes, who picked up the point made by the noble Baroness, Lady Heyhoe Flint. Instead, it is about making those markets that exist work fairly, removing the fraud where it is possible, and making sure that people can see and get access to the events they want. When you have consumers, event organisers, participants and the police—for goodness’ sake—on your side, what on earth are you doing, and who are you listening to when you stand against them?
My Lords, many of us love British sport and our creative industries. This love unites most of us in the House and certainly those in the Chamber today. As the noble Lord, Lord Stevenson, said, it has been a very good debate. We have had a star cast, including ladies of sport—the noble Baronesses, Lady Grey-Thompson and Lady Heyhoe Flint—and the noble Lord, Lord Holmes, so we have had real experts.
Noble Lords will know that I take a great deal of personal interest in this issue. In fact, I should almost declare an interest as a mother of three cricketers. I have met the England and Wales Cricket Board, the organisers of Wimbledon and the Rugby Football Union. I have also met Which? and I am aware of the interest of UK Music, which I meet on other things. I have actively engaged with Mike Weatherley MP and his All-Party Parliamentary Group on Ticket Abuse. I have been working with these bodies to try to get to the core of this issue: what we can best do to help and protect the fans? It is the fans who really matter in this equation.
I congratulate the noble Lords, Lord Moynihan and Lord Clement-Jones, and the noble Baroness, Lady Heyhoe Flint, on their extensive work on this issue and the expertise they always bring to our debates. Most fans buy tickets direct from the venue or the organiser, often well in advance of the event. To pick up a point made by the noble Baroness, Lady Heyhoe Flint, debenture holders and sponsors often get ticket allocations well in advance, which is why there are sometimes tickets on sale well ahead of events. A lot can change between a ticket being bought and the event itself—people fall ill or make other plans—and these fans then resell their tickets to other fans. This is the market we are discussing today, for which there has been great support. I agree with the All-Party Parliamentary Group on Ticket Abuse when it says that,
“the existence of a secondary market is justified by the need of consumers to pass on tickets bought for events that they can no longer use”.
Let me be clear: we believe fans should be protected in this market.
If the House will bear with me, I will respond to the debate and will then set out some new plans to take things forward. The noble Lord, Lord Moynihan, talked about fraud. Fraud is a criminal offence under the Fraud Act 2006. It covers activity by all sellers, including consumers and traders. Many of the actions referred to are fraud: selling tickets you do not have and have not purchased is fraud; traders impersonating consumers to sell tickets are committing criminal offences; and, arguably, selling tickets knowingly in contradiction of their terms and conditions without informing the consumer of this may be fraud.
Repeating in the Bill that fraud is a crime would not make it any more illegal. What matters to fans, and many of your Lordships, is enforcement of the law that we have. There is fraud in the ticket market: we do not dispute the numbers quoted from the National Fraud Authority on this. In the specific case of ticket fraud, it reports £1.5 billion of losses. That is not a number to be ignored and we are not going to ignore it. As my noble friend Lord Grade said, there is a serious problem.
The Government have a huge focus on cutting economic crime, and we have created a powerful Economic Crime Command within the National Crime Agency to drive this forward. We have also strengthened the reporting and intelligence arrangements for fraud. ActionFraud is now the single national reporting centre for fraud and financially motivated cybercrime. Since 1 April this year, responsibility for ActionFraud rests with the City of London Police, bringing it closer to the National Fraud Intelligence Bureau. This allows links to be made between disparate crimes that would otherwise not be connected and it has led to a significant increase in the reporting of fraud. The Government are also investing £860 million through the National Cyber Security Programme, which includes work on online fraud.
The efforts of the police during the Olympic and Paralympic Games have been referred to, including by my noble friend Lord Deben. We have learnt from the Olympics how better to work with the enforcement community and the ticketing marketplaces, but of course, as has been said, the Olympics had separate legislation that banned resale. A great deal of special enforcement effort was put into the Olympics. Even so, there were some empty seats. The Olympics were special but they were different. That system is not appropriate for the great range of tickets that we are talking about today.
I assure the House that the City of London Police will continue to undertake work against ticketing fraud as part of its overall response to the problem of fraud; for example, it has already been working with the organisers of the Rugby World Cup to exclude those participants in the ticketing lottery who have links with previous reports of fraud. It is also working in partnership with the Get Safe Online campaign to ensure that advice on staying safe is made available to fans who may be targeted by ticketing scams.
I move on to consumer law. As has been said, a substantial body of consumer law is in place to protect consumers, wherever they buy their tickets, and this is backed up by enforcement and sanctions. The Consumer Protection from Unfair Trading Regulations 2008 protect consumers from misleading actions. We have also introduced the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which ensure that buyers get the information they need. We have spelt out in guidance what information a trader must provide. It sets out plainly what they have to do, and the courts will often rely on such guidance in interpreting the law. I add for the benefit of my noble friend Lord Deben that these sets of regulations stem from EU directives. I agree with him that we need to be a major and constructive force in Europe, so I do not think that we should sweep away provisions in this area that come from the EU.
I also want to address the suggestion made in the debate that the inclusion of “I don’t know” drives a coach and horses through these regulations. That is not the case. There are allowances for the practical reality that there will be some details that a seller just will not know; for example, if the tickets are for a standing area, they will not have a seat number. If traders know details but do not give them or say that they did not have them when they did, they will be in breach of the 2013 regulations. The requirement is to provide the main characteristics, and that is set out in UK law and in the EU directive. If details are not given and traders claim that they did not have them, it is for them to prove that they could not give them; for example, if it was simply the case that they had not opened up the confirmation e-mail to find the seat number, that would not be acceptable.
In response to the third question from my noble friend Lady Heyhoe Flint—she gave me an exam paper—regulations do not rely on guidance. The guidance merely aids interpretation, which is ultimately a judicial matter. The definition of a trader follows the EU directive, and it has been widely used for some time. The courts will be the final arbiter of this term. Of course, the regulations are not voluntary. They are secondary, not primary, legislation, but that does not mean that they are not legally binding. They are binding and a civil enforcement regime led by the Competition and Markets Authority is behind them. I will be passing on the Hansard report of this debate to the authority, and indeed I will also be passing on the helpful suggestions from my noble friend Lord Younger about how we might improve enforcement.
Although the guidance is not statutory, traders in breach of it are very likely to be in breach of consumer contract legislation. I should add that criminal sanctions are available if the 2008 regulations are breached: a fine of up to £5,000 and up to two years in prison. Enforcement is by local trading standards services and the Competition and Markets Authority, which I have already mentioned.
We believe that the best way to protect fans from fraud and breaches of consumer law is to ensure that they have a safe place to buy and sell tickets. It would be “Christmas for ticket touts” if government regulations were to push fans away from these safe places. One in four resales takes place outside the venue—the most unsecure and risky place for fans. Almost half of resales take place through online classified ads. These numbers are already too high. We should be nudging consumers away from these fora, not increasing the incentive for them to use the black market.
I agree with the brave intervention from my noble friend Lord Stoneham, as well as with the comments of my noble friend Lord Borwick, about the risk of tickets being cancelled. There has been a very welcome trend in recent years towards safe, tailored online ticket marketplaces and away from touts. These websites offer a high degree of consumer protection—infinitely more than was there before and often in excess of what the law requires. These sites have processes in place to prevent, discourage and punish fraud, and I know that they work with the enforcement authorities. Additional regulation via this amendment, such as long forms for individual consumers to fill out when they sell, would only deter consumers from using safe sites. No one likes filling in forms; no one likes being told what to do. If we try to do that, there will be a grave risk that fans will move to unsecure sites or to buying tickets overseas.
That brings me on to where we see problems with the amendment. I welcome the changes made to it since Committee but I am still not able to support it. It goes far beyond guidance and it would be a much bigger burden on consumers and business than the status quo. The fact is that it is not light touch, to use the words of the noble Baroness, Lady Crawley. It is certainly not feather-light. I am against regulating consumers, by which we mean fans. Sometimes a fan cannot attend an event, for reasons that I have stated. I truly believe that supporters should be free from government regulation. Given that over 75% of our fans think that they have a right to resell their ticket once they have paid for it, regulation may in any case cause them to revert to the black market.
The information to be provided would be a considerable burden on both traders and consumers. Providing “all relevant information” is a huge ask, as I think the comments from my noble friend Lady Heyhoe Flint showed. I am particularly worried about requiring the name of the seller for individual consumers. That seems like an open door to identity theft. When experts such as the Metropolitan Police and eBay advise internet users not to give their real name online, I would be uncomfortable about requiring that.
Likewise, having a requirement, such as in subsection (7) of the proposed new clause, to state whether a ticket is sold,
“in contravention of the terms and conditions”,
on the face of the law makes me distinctly uncomfortable. I draw the House’s attention to the scope of this amendment, which covers all tickets—from those for the Royal Opera House to those for the Hay literature festival, and from £500 tennis tickets to £10 Young Vic tickets. Over 30% of UK adults buy tickets to live events every year, and I am reluctant to introduce regulation with this wide scope. I agree with the Culture, Media and Sport Committee, which said:
“Any attempt to ban the secondary market outright would also be a very serious step in that it would criminalise what has been a perfectly lawful activity”.
That is not what is being asked for, but that, I think, is the risk.
I must mention the requirement to comply with EU law. There are specific requirements not to go beyond what the law requires and the consumer rights directive is partly subject to such a requirement. Our analysis is that this amendment could breach that requirement.
To return to the exam paper from the noble Baroness, Lady Heyhoe Flint, on her first question we do not agree that the amendment places a low burden on the seller, for the reasons I have stated. The requirement for all relevant information by all sellers is substantial. On her second question, consumers must, of course, be protected from being misled. That is why it is essential to keep sales above ground and in the open.
I turn finally to what we are doing. We should not undermine the resale market. We should ensure that consumers are protected whenever and wherever they buy tickets. We agree that there is an issue around consumers selling large batches of tickets for a profit and we should discourage this behaviour and protect consumers when they buy from these individuals. These sellers often impersonate real fans in order to sell without complying with consumer law—something that is already an offence punishable by a fine or imprisonment. I can therefore announce today that we will begin a programme of work to address this.
First, we will work with the marketplaces to deter those sellers. We will ensure that it is very clear to those sellers that they will be committing a criminal offence if they impersonate a real fan—a genuine consumer—to evade consumer law. We will also ensure that sellers are aware of the information they must provide to the buyer. This will take the form of wording on the sites based on what eBay uses now, in clear, easy-to-understand language.
As the second part of our programme—and picking up something that the noble Lord, Lord Moynihan, said—we will include in our guidance on the Bill detail on what constitutes a “trader”. This is a point of legal detail but I think from today’s debate it is a very important one. I do not want these sellers to be able to claim that they are a consumer and therefore evade their obligations under consumer law based on the legal definition of trader. The guidance will state that it includes people who have a day job but also sell tickets for profit on the side; we had an example of a BA pilot, whom we spent a lot of time on in Committee. They would be traders not consumers and therefore have to operate transparently as required in the law; for example, an office clerk who has no interest in “X Factor Live” but buys and sells “X Factor” tickets to top up his pay would be considered a trader and therefore have to provide information about himself and what he was selling in order to protect consumers.
I have spoken at length, but this is an important issue. I have studied this issue intimately with an open mind. After talking to all interested parties, and given the very recent changes made to legislation, I am not convinced that legislation is the right answer. However, I am convinced that we can always do better at enforcement and ensuring compliance. The online ticket marketplaces provide a safe place to buy and sell online. We must not push the industry back underground. If we do that, we will create the conditions which allow fraud and scams to flourish. We have taken action and I have committed today to a package of measures to do more. Work is being done by the City of London Police to tackle fraud and we are deterring criminals from the market and committing to give more information to sellers.
However, I am keen that the Government should keep a beady eye on the consumer regulations and on how the revised BIS guidance and other aspects of ticket practice and regulation are progressing. My officials in BIS will therefore host, in partnership with DCMS, a round-table meeting in June to hear stakeholders’ views on this and ensure that this issue is not put on the back burner and that all parties, from the Competition and Markets Authority to the Home Office and police, are involved.
I have responses to the questions from my noble friend Lord Holmes and others, which I think I will pass on in bilateral discussion. I agree with my noble friend Lady Wilcox that rewriting the law is the wrong way to tackle this issue. Legislation exists and I think it can be enforced better. We are committed to taking action and to keeping this issue on the agenda. I therefore ask the noble Lord to withdraw his amendment.
Can the Minister help us in this way? She has put forward a number of changes that she intends to make in bilateral discussions and in guidance. Will she agree to take this away and see whether what she has already said can be included in the Bill as statutory requirements? If she were able to do that, I think many of us would be able to support her. The argument has been quite clear that no one is trying to stop the secondary market and no one is trying to do the things that she fears. All we are trying to do is to stand up for the consumer. If she could just give us that, I am sure that we would support her.
I thank my noble friend Lord Deben. I think I have made a number of commitments. I have set them out in the legislative framework that exists. I will certainly look at how the points that I have made today are implemented. It would be wrong for me to make a commitment to amend the Bill because I am not sure that amending the Bill is what is needed today. What I think is needed is the way forward that I have described. It has been a good debate. The Government have listened and I ask for the amendment to be withdrawn.
My Lords, one again I thank my noble friend the Minister for the time she has taken on this issue, for the hours of meetings and the consultation she has undergone. I also thank all noble Lords who have spoken in this debate. A number of my noble friends believe there may be existing recourse under, for example, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008, which my noble friend mentioned. No one can genuinely believe that that is a reasonable remedy for a true sports fan who has gone to Gleneagles to see the Ryder Cup and has been sent home disappointed.
That is all ex post. The problem is that something is seriously wrong with what is on the face of the ticket today. Something is seriously wrong with the implementation of the regulations. Something is so wrong that this is a £1.5 billion fraud every year. It is not something that requires minor change or, with the greatest respect to my noble friend the Minister, will be remedied by another round table the month after the general election next year. It will be faced only if the Government recognise their own best practice. I am not standing before the House asking for a whole raft of new legislation. On the contrary, I would argue that we should have less regulation, but the regulation that we should have should be on the face of the Bill and it should work. That is all the amendment seeks.
We are absolutely not against the secondary market. I say to noble Lords who have implied that we are that we firmly believe in the importance of an effective secondary market. We live in an age where the web drives this market and we want to ensure that that secondary market works to the benefit of consumers. The Bill is all about consumers. We believe in choice, access and information but we believe in getting the secondary market right. We believe in ensuring that an individual who buys a ticket on the secondary market has the information on the ticket to ensure that they can enjoy the theatre or go to a sporting event without being party to £1.5 billion a year scam.
Consumers are losing out. It is not just noble friends who have spoken to the amendment who believe in what I am saying. The all-party group believes it and the police believe it. All those who reported to the House after the Olympic Games, having learnt the lessons of the Olympic and Paralympic Games, believe in the effective operation of a secondary market. The reality is that the existing regulations do not work. The noble Lord, Lord Pendry, and I have been working together on this for 20 years. Three sets of legislative proposals have been made and the reality is that the most recent regulations simply do not work. We are very grateful to the Minister for offering another round table and encouragement to the industry. We are grateful to her for the opportunity to sit down and have a review next June. However, to use a sporting metaphor, that kind of offer would be tantamount to kicking the ball into the long grass for another few years.
It is a simple, clear amendment about increasing transparency. It is about improving and reducing regulation and empowering consumers. Given, sadly, that, in response to the noble Lord, Lord Deben, the Minister said that she is not prepared to go away, consider what has been said and come back at Third Reading with an amendment, I have no alternative but to test the will of the House.
14: After Clause 32, insert the following new Clause—
“Goods sold under hire-purchase agreements and conditional sales contracts
(1) This section applies to a contract under which a consumer purchases goods from a trader under—
(a) a hire-purchase agreement (as defined in section 7), or(b) a conditional sales contract (as defined in section 5(3)).(2) The trader—
(a) must provide information and adequate explanations to the consumer before a contract is made, which would allow the consumer to compare the total sum that he or she would pay under that contract and a representative retail price for the goods;(b) must not require the consumer to purchase an insurance policy which is sold or brokered by the trader as a condition of entering into a contract.(3) Within 12 months of the passing of this Act, the Secretary of State shall create regulations by statutory instrument—
(a) to specify steps that a trader must take before taking action to enforce rights under a contract or to take possession of the goods; (b) to specify steps that a trader must take before a contract is made to ensure that that contract is affordable and appropriate for the consumer.”
If we are allowed to have a small word of congratulation, I congratulate the noble Lord, Lord Moynihan.
My Lords, this House, as we know, has had some major achievements in tackling high-cost and exploitative credit. Amendment 14 concerns a new, effectively unregulated and exploitative form of loan that has sprung up on our high streets. Along with other high-cost credit, it is found in low-income and deprived areas. It is known as rent to own. It works by consumers theoretically renting household goods—washing machines, fridges, TVs, beds—but with the rent eventually being used to purchase the product.
However, because it is deemed rent, there are few of the safeguards which would cover, for example, a bank loan, if that had been taken out to buy the same product. So there are no checks on affordability for a product aimed at consumers who are “credit constrained”—those are the words of the person who runs one of these big companies. There are no safeguards against the property being repossessed for missing a payment, because, until the final payment, the product is only rented, not owned. While the consumer is theoretically renting the product, though in their mind they are in the process of buying, a missed payment can lead to repossession.
Some of these stores show little forbearance over a missed payment, despite the fact that the consumer may have already paid well over the true value of the goods by the time they come to miss a payment. Furthermore, the prices charged are pretty exorbitant, far exceeding normal retail prices, even including any interest had a bank loan been used to pay for the item. I found a washing machine priced from £400 to £600, depending on which outlet I went to, but it was £1,560 at one of the rent-to-buy stores—up to four times the price. A table which was £200 at Argos was £468 at BrightHouse, one of the rent-to-buy stores. The APR, which admittedly it prints in some of its brochures, is between 60% and 90%. Adding up all these so-called rents amounts to far more than the list price, plus what interest would be paid if the item was bought with a bank loan.
Furthermore, the companies add in compulsory and expensive insurance, even though the goods still belong to the shop, so probably do not even need insuring. BrightHouse told me that the insurance on a £600 product would be £150 over three years. That is far higher than any of us would be able to get for a normal contents insurance. And the insurance is with its wholly owned, Malta-based insurance company or via its Isle of Man company. To add insult to injury, its marketing uses that favourite trick to tempt the buyer, highlighting the price per week rather than the total cost. So the price of a Samsung gold laptop is splashed as £13 a week, albeit that the full cost is £1,392, which includes 94.7% APR. It is little wonder that more than a quarter return their goods within the first 13 weeks of purchase, by which time they will have paid quite a chunk of money for just three months’ use of the item. In the case I mentioned, £170 would have been paid for something that might retail for only £500.
It is also little wonder that there is money to be made in this way. One of BrightHouse’s companies, Caversham Finance Ltd, made £30 million profit before tax, despite its trading company’s annual report stating:
“2014 was … challenging … with customers under pressure from continued high inflation, low wage growth and … the government’s much heralded changes to the welfare system have increased uncertainty for a significant portion of BrightHouse customers who are completely or partially reliant on benefits”.
We have it even from the companies themselves that they are targeting these products at customers who are completely or partially reliant on benefits. Is anyone surprised that I question the business model of a firm that profits from selling high-end goods at over-the-odds prices with compulsory expensive insurance to some of the most vulnerable in society?
Amendment 14 requires a company to set out the total price of the goods including the cost of the credit agreement. It bans making insurance compulsory and it requires the Government to set out guidelines both on checks on affordability and on possible repossession. This is not an attack on any weekly payment system, which can help those on lower incomes with their household budgeting. However, the business model used by companies like BrightHouse is so stacked against the consumer that it is little short of exploitation. I therefore hope that the Government will accept this measured approach, which does not ban this form of credit; it simply introduces greater transparency along with some safeguards. I beg to move.
My Lords, the Government share the noble Baroness’s concerns about the risk of consumer detriment in the hire-purchase credit market, particularly to the vulnerable consumers that she has described to the House. I wrote to the noble Baroness on this subject recently and want to take this opportunity to underline that this does include rent to own and we are talking about the same issue.
We have stated before in Committee that consumer credit regulation transferred to the Financial Conduct Authority on 1 April this year. The rules for the consumer credit market, put in place by the FCA, were made with the stated aim of: ensuring that firms lend only to borrowers who can afford it; increasing borrowers’ awareness of the costs and risks of borrowing unaffordably; and ensuring that consumers have access to support if they have financial difficulties.
Accordingly, the FCA rules for hire purchase and conditional sale agreements, including rent-to-own agreements, specifically require firms to provide pre-contractual explanations and information to a consumer before a contract is made. These rules are in line with European requirements, including setting out the total amount payable, the cash price of an item and the total cash price if there is more than one.
Firms must also adhere to debt collection rules, including treating customers in default or arrears difficulties with forbearance and due consideration; and assess creditworthiness and affordability, including the potential to impact adversely on the consumer’s financial situation, and the consumer’s ability to make repayments as they fall due. Where firms sell insurance products, they must do so in line with the FCA’s requirements around assessing consumers’ eligibility to claim on a product, and the high-level principle of “treating customers fairly”. Firms must also give a separate price for the insurance product and explain whether it is compulsory.
These rules are in force now, and the FCA can enforce breaches of its rules— there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA keeps all its rules under review and continually considers whether further interventions are needed in the consumer credit market. It will set out further thinking early in the new year.
Regarding the noble Baroness’s specific points about contract enforceability, lenders are already required to serve a statutory notice under the Consumer Credit Act before enforcing the agreement or repossessing goods. Goods cannot be repossessed without a court order if the consumer has paid at least a third of the total amount payable. The FCA also sets out how firms must undertake affordability assessments before entering into an agreement, including taking reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner, without undue difficulties.
To underline that point, the FCA has had full use of these powers since 1 April and can make use its broad enforcement toolkit to punish breaches of its rules. The FCA also has flexible rule-making powers to take further action where it deems it necessary in the protection of consumers. The Government believe that this, alongside the existing protections set out in legislation, provides robust protections for consumers in the conditional sale and hire purchase markets. I therefore ask the noble Baroness to withdraw her amendment.
Before the Minister sits down, could she address the point about the requirement to purchase an insurance policy? Is that something specifically not permitted at the moment; or is she saying that that is acceptable policy that the Government are prepared to see happen, on the basis that customers are able to enter into choices knowing their position? At the moment, it is not clear that that rather important clause in the amendment is addressed by the answer that the Minister has given.
My Lords, the information that I have regarding insurance is that the FCA makes clear rules about insurance with these sorts of products. I will write to the noble Lord to clarify the situation on insurance that has to be purchased from the same firm from which customers are taking out hire purchase on a product.
I thank the Minister for that and indeed for the letter from her colleague the noble Baroness, Lady Neville-Rolfe, on 13 November. This is a little like the last debate. We keep being told that all the regulations are there and that everything is fine but then we hear from Citizens Advice, Debt Line and other organisations that people are getting into trouble with these payments. The figure that was given to me in a meeting this week with BrightHouse that a quarter of the people are actually having to stop payments after 13 weeks suggests that there is something wrong. We are back into, “Don't worry about it: all the rules are there”, but the evidence on the street is that people are taking out these products when they clearly cannot afford them.
I have two other issues. One is insurance. It used to be very common to have to buy travel insurance when you went through a travel agent, but the Financial Services Authority, as it was at the time, stopped that. If the answer to my noble friend Lord Harris’s question is that compulsory insurance purchased through that company so that you cannot shop around is permitted at the moment, we hope that in future the FCA will say that it is not permitted.
I leave the other issue with the Minister because I do not expect a reply at the moment. One of the great advantages of being regulated by the FCA of course will be absolute access to the Financial Ombudsman Service. It would be helpful to know whether that will be made known to all customers of these companies. I hope that the FCA will hear this and we do not continue with the idea that just because something is being regulated there are no problems, because sadly there are. I beg leave to withdraw the amendment.
Amendment 14 withdrawn.
15: After Clause 32, insert the following new Clause—
“Product safety and recall
(1) The General Product Safety Regulations 2005 (SI 2005/1803) are amended as follows.
(2) In regulation 9 (obligations of producers and distributors), after paragraph (3)(d) insert—
“(e) a summary of what the producer or distributor suspects, or has reasonable grounds to suspect, is the number of consumers affected and the type of personal injuries and property damage which the risk associated to the product has caused”.(3) In regulation 32 (reports), after paragraph (5), insert—
“(6) Before completing any report under this regulation, the Secretary of State shall consult the enforcement authorities, such bodies representative of producers and distributors, such bodies representative of consumers and such other persons as he thinks fit.”.
(4) In regulation 33(3) (duty to notify Secretary of State and Commission)—
(a) after “specifying the reason for taking it” insert “, and shall publish such measure, and the reasons for taking it, on his department’s website”,(b) after “of any modification or lifting of such a measure” insert “and shall publish any such modification or lifting immediately on his department’s website”.(5) In regulation 33(5)—
(a) after “the Secretary of State shall immediately” insert “publish such measure or action on his department’s website and”,(b) after “of any modification or withdrawal of any such measure or action” insert “and shall publish any such modification or withdrawal immediately on his department’s website”.(6) In regulation 39 (information)—
(a) in paragraph (1), for “shall in general make available to the public such information as is available to it on the following matters relating to the risks to consumer health and safety posed by a product” substitute “which has received a notification under regulation 9(1) shall immediately publish on its website in respect of the product”,(b) after paragraph (1)(b), insert—“(c) a summary of the number of people reasonably suspected of being affected, and the type of personal injuries and property damage reasonably suspected of being caused, by the risk”,(c) in paragraph (1), for “and the measures taken” substitute “and the measures or action taken, whether on a compulsory or voluntary basis,”.”
My Lords, this amendment is in my name and that of my noble friend Lord Stevenson. It addresses a serious, indeed often fatal, weakness in consumer protection. When a dangerous fault occurs in an electrical product, there is no adequate mechanism whereby other owners of that same dangerous product are notified of the need to exchange it. The amendment therefore requires manufacturers to inform enforcement authorities about the number of consumers affected and the extent of damage and injury that has been caused. It also requires the Secretary of State to publish information on dangerous products.
It is estimated that approximately 40 to 45 deaths a year are caused by faulty appliances. Although there is a system for recalling dangerous products, it is deeply flawed because of the difficulties of alerting consumers who bought such faulty products and because of unjustifiable delays on the part of some manufacturers in recalling products, even once they know them to be unsafe. Such cases relate to potentially fatal faults arising either from fire, electrocution or carbon monoxide poisoning. Indeed, probably more than 1 million faulty products are still in people’s homes.
The problem is that manufacturers currently have no legal obligation to declare how many such dangerous applications are in circulation. Furthermore, once a manufacture becomes aware of faults, there is no specified timeframe within which they have to act to have others recalled. Some manufacturers have taken years to take action after accidents caused by their appliances. The BIS guidelines are that recall should be expected as soon as the manufacturer becomes aware of the problem, but that is not specific enough. Even more important, perhaps, it is not mandatory. Sadly we see preventable deaths occurring because of failings in the recall system.
I spoke in Committee about the case of Santosh Benjamin-Muthiah, a 36 year-old father of two who was killed in 2010 by a fire caused by a fridge freezer that had been recalled. The manufacturer had been aware of the fault three years earlier but failed to issue a safety notice until 2011—in other words, a year after the death of Santosh Benjamin-Muthiah. By that time, half a million defective fridge-freezers had been sold. Even two years after the recall started, there were probably 100,000 still unidentified in people’s homes.
In another case, Beko was fined £76,600 for failing to inform trading standards of a serious risk posed by some of its cookers. Despite being aware of the fault in 2009, Beko notified trading standards only in 2013. Hotpoint recalled dishwashers with a fire risk a whole year after Which? had raised concerns about them. So there are problems of late starting but, even once something starts, the average success rate for product recalls is only between 10% and 20%.
The current voluntary and slightly haphazard approach is clearly not working. On the one hand, manufacturers fail to recall—due either to cost or to worries about reputational risk, in which case sanctions are inadequate. On the other, despite the producers’ best efforts, current practice is dangerously inadequate, leaving thousands of faulty products in circulation.
In Committee, we asked the Government how many cases of preventable deaths were documented. The Minister responded by letter, saying that she was unable to provide the number of fatal injuries caused by unsafe electrical appliances. However, the DCLG fire statistics do have the data, which show that there were more than 16,000 fires a year caused by faulty products, leading to 15 deaths and nearly 800 injuries. Electrical Safety First’s research into consumer attitudes towards product recalls demonstrated a strong appetite for change. Its report, Consumer Voices on Product Recall, found that a quarter of people thought there was already a central repository of all recall information. So the website called for in our amendment would create what many consumers assume already exists.
Only one-third of consumers always fill in the registration form down at the bottom of the packet when they buy electrical products—we have all seen it there. Six out of 10 say they would be more likely to fill it in if reassured that the information would not be used for commercial gain. Only an independent database, as proposed in our amendment, would deliver this peace of mind. An industry-led list would not encourage people to register, because they would believe that their details would be used for marketing. Of 17 registration forms analysed, only one mentioned safety as a benefit of registration—so it is no wonder people do not think they want to sign up. It is simply not the manufacturers’ priority and it will not become their priority until legislation compels them to take action. Peter Dartford, President of the Chief Fire Officers Association, said:
“The reality is that it is the manufacturers who have created these risks and it is their moral and legal responsibility to ensure these risks are eradicated from homes”.
At the inquest into the death of Mr Benjamin-Muthiah, the coroner called for the creation of a simple, easy to use, government-funded or national website where all faulty products could be registered and accessed by consumers and retailers. He called also for increases in the fines for manufacturers who failed to notify and the creation of a code of practice on product recalls. Our amendment would strengthen consumer protection in line with the views of the coroner, of consumers and of the fire officers, to say nothing of the views of the families of those who have died needlessly. I beg to move.
My Lords, about a year ago, in my capacity as chair of the National Trading Standards Board, I had a meeting with what I think was then called the Electrical Safety Council, now rebranded as Electrical Safety First. We were not discussing this issue but it was raised as one of the concerns that the then Electrical Safety Council had about the way in which the recall system worked.
My noble friend highlighted a number of concerning issues. These include, for example, the length of time that often seems to elapse between manufacturers becoming aware of a product failure or an incident, even one leading to an inquest, before they take action to recall products. Their recall efforts are often minimalist in trying to make sure that the message reaches consumers.
I hope that the Government are not simply going to tell us that self-regulation works best and that the systems in place are adequate. The examples that have been cited and the fact that this remains a continuing concern show clearly that action needs to be taken along the lines of my noble friend’s amendment.
My Lords, protecting consumers from serious injury and property damage caused by unsafe appliances is a crucial government responsibility. I can assure your Lordships that the Government are listening carefully to the concerns expressed in this House during the passage of this Bill and are absolutely committed to improving the systems of product recall, as I will explain. I am grateful to the noble Baroness, Lady Hayter, for sharing some recent experiences.
I am grateful for the work done by the noble Lord, Lord Harris, and the trading standards teams across the country which put considerable effort into enforcing an effective product safety regime. In 2012, they inspected more than 100,000 products, which led to more than 2,000 product lines being withdrawn from the market and more than 750 voluntary actions by manufacturers and retailers. There are other withdrawals that good retailers take proactively. Product liability law is an added incentive to action. Most manufacturers and retailers are keen to co-operate with this enforcement effort and there are strong sanctions if they do not. Under product safety law, offenders can rightly face fines of up to £20,000 and 12 months in jail.
However, noble Lords are understandably concerned that we should be rigorous in looking for ways to improve the effectiveness of the recall system, the importance of which I know so well from my retail experience. One important aspect of an effective system is making sure that retailers and manufacturers can contact consumers who have bought an unsafe product. Some good work is already going on across the supply chain to address this issue. It is being led by the Association of Manufacturers of Domestic Appliances and supported by BIS and the Trading Standards Institute on a Register my Appliance portal for consumers, which was launched earlier this month—I hope that noble Lords are all listening because, as a citizen, one should register one’s own appliances. This will make it considerably easier for consumers to register contact details so that they can be traced more easily in the event of a product recall. By encouraging consumers to register their products and to maintain their contact details, it will be much easier to contact relevant consumers in the event of a product recall.
In addition, Electrical Safety First, to which the noble Lord, Lord Harris, referred, is working to explore the options for improving traceability and recall effectiveness, in partnership with government and industry members. While this work should increase the traceability of consumers in the event of a product recall, we also need to consider whether we can improve the effectiveness of the current system for registering and publicising products that are subject to recall. Alerting consumers to the risks posed by faulty products can be difficult, especially where goods have changed hands or contact details have altered. It is important that all those who have a part to play in alerting consumers can access the information they need. That is why we are acting today to address the concerns raised by noble Lords by launching an independent review of the product recall system. The review will consider existing information systems, such as the Trading Standards Institute website for informing consumers about product recalls, and how well these work in practice, as well as looking at the cases and data to which the noble Baroness referred. It will also consider how well the EU’s RAPEX rapid alert system for dangerous consumer products covers UK needs and identify any gaps in the coverage that may need to be addressed. Once we have appointed a suitable chair for this review, we will expect it to report back within 12 months.
That review demonstrates that the Government take very seriously the issues raised by noble Lords during the passage of the Bill. Robust product safety legislation is in place based on an EU-wide regime, and this legislation provides consistency for business and consumers across member states, but we must ensure that the whole system works effectively to minimise harm to consumers. That will require all the different players to work better in partnership across the supply chain.
In the light of our decision to conduct an independent review of product recall, I very much hope that the noble Baroness will feel able to withdraw her amendment.
I genuinely thank the Minister for using this opportunity to announce that today. I also thank my noble friend Lord Harris of Haringey for his support for that. I welcome the review and I hope that it will consider one of the problems with the European system at the moment. It covers only goods that are sold in more than one EU country, not those sold either only in this country or only in this country and non-EU countries. I note the Register My Appliance initiative, but there is a problem with it which I hope the Government’s review will consider. The industry-led solution led by the AMDEA continues to be an opt-out system—you have to opt out if you do not want your details used for marketing purposes. It will make people reluctant to register if they know that they will get more junk mail or e-mails from product manufacturers.
I am advised by the people at Electricity Safety First that the system as set up will be used for marketing unless you opt out, and we know the difficulty with that. I trust that that can be looked at in the review.
Amendment 15 withdrawn.
Clause 33: Contracts covered by this Chapter
16: Clause 33, page 21, line 40, at end insert—
“( ) Digital content as defined under section 2(9) shall carry the same rights as goods under this Act.”
My Lords, Amendment 16 stands in my name and in the name of my noble friend Lady Hayter of Kentish Town. Digital sales are booming and the digital music, video and games market now accounts for 43% of the total UK entertainment sector. Recent research puts the UK as the leading European country for total digital spent per capita. This is indeed the future.
The main focus of Amendment 16 is the question of whether, when digital content is provided in an intangible form and does not meet quality standards, the consumer should, as the Government propose, be restricted simply to a right of repair or replacement. We believe very strongly that, in addition, the consumer should in such cases have both a short-term and a long-term right to reject the digital content. The Government’s argument is that where digital content is downloaded or streamed, it is not provided on a tangible medium and therefore cannot be returned in any meaningful sense. Passing over the obvious metaphysical absurdity of believing that only physical objects can be meaningful, that is inconsistent—not least because consumers will have a short-term and a long-term right to reject the identical digital content if it is bought on a tangible medium, such as a DVD or CD.
As the BIS Select Committee commented when it was reviewing the draft Bill:
“The different remedies available for tangible and intangible digital content in the bill would … embed inconsistency into consumer law. Consumers experience intangible digital content in the same way as tangible digital content, as a good, and therefore would expect to be able to reject it and receive a refund if the statutory rights are not met”.
Well, they can get a refund, but they cannot reject it. It cannot be sensible for the Government to be sanctioning two different regimes for tangible and intangible goods and services, and I very much doubt that the courts will support that.
The department has produced and circulated a useful note on this whole issue, for which I am very grateful. I am also grateful to the Minister, who wrote to me after the debate we had on this issue in Committee. That was also extremely helpful and informative. However, it is a question of consistency and equity not whether we can analyse this or parse it to the last extent. The right thing to do here is to provide the same rights for all faulty purchases, tangible or intangible, while recognising that any short-term or long-term right to reject needs to be matched by a requirement placed on the consumer to delete the content and, if that is impracticable, to desist from use or copying. There are already remedies in law that would match this issue.
The BIS adviser on this issue, Professor Robert Bradgate, who sadly, I recently learnt, died before he could see his recommendations implemented, recognised that problem in his initial report and suggested that it should be tackled by,
“an extension of the definition of goods to apply provisions of the Act both to goods, and to digital products … and to include power in the … legislation for Her Majesty’s Secretary of State to apply the Act by Statutory Instrument to new developments as they arise”.
That remains good advice. I beg to move.
My Lords, I am not sure whether the noble Lord, Lord Stevenson, will thank me for making an even shorter speech than I made in the previous debate. I must say that my breath is somewhat taken away by the sweeping nature of the amendment, which tries to sweep all digital content into the clauses on the sale of goods. The software industry may have some difficulty with some areas of Chapter 3 on digital content, but if what the noble Lord wants happened, it would be horrified. The dialogue between the software industry and the Government may not have produced everything that the software industry wants, but it has recognised that digital content is very different. I forewarned the noble Baroness, Lady King, that I would cite her. Like me, she said:
“I will not speak at length on this amendment or the other amendments … but it seems worth reiterating the peculiar nature of digital content”. [Official Report, 20/10/14; col. GC 183.]
Although I do not have the exact reference, I entirely agree with her. The noble Lord, Lord Knight, made similar points about the peculiar nature of digital content. It would be an extremely retrograde step to sweep up the additional content in this. If the noble Lord had come with individual amendments to the clauses to bring digital content in, I might have been more sympathetic, because one then could have seen the exact consequences of the amendments, but the consequences of this amendment could be quite unforeseen and extremely contrary to the interests of the strong and vibrant software industry that we have in this country.
My Lords, the Bill brings in clear quality rights for consumers of digital content for the first time. In this digital age, many of us are consumers of digital content on our smartphones, our smart televisions, our computers and, I was hearing this morning, on wearables. The sector is crucial and growing for the UK economy. The Business Population Survey estimated that there were more than 300,000 digital content firms in 2013—e-book publishers, games, software and website developers—with an annual turnover of just over £200 billion. It is vital that we have the right sort of regulation for that important, very innovative sector. That is why we have consulted widely on our approach to digital content.
The digital content chapter provides that when digital content is faulty, the consumer is entitled to a repair or replacement of the digital content. If that cannot be done within a reasonable time, or without significant inconvenience to the consumer, the consumer is entitled to a price reduction, which may mean some money back or, in some cases, 100%. I set out the general picture because we are about to discuss a number of amendments in this area.
This approach takes account of the way that industry works. As my noble friend Lord Clement-Jones, who I am delighted to see here at this debate, said in Grand Committee,
“in practical terms the software industry will always find a workaround or fix to a problem”.—Official Report, 20/10/14; col. GC 211.]
I have been using that quote elsewhere. In other words, when digital content is faulty, the problem is usually remedied quickly through an update.
The proposed amendment would apply to intangible digital content the same rights as apply to goods. So when intangible digital content is faulty, the consumer would also be entitled to a short-term right to reject, a limit to a single repair or replacement, and a final right to reject. Applying the full suite of goods remedies to digital content where it does not form part of goods, as it does in a washing machine, for example, would result in provisions that were not fit for the digital world.
We want provisions that encourage an increase in uptake and allow industry to innovate and flourish. This amendment would be a retrograde step, to the detriment of consumers. As the noble Lord, Lord Knight, who has already been quoted as a real digital expert, reflected in Committee, we must remember that many digital content producers are micro-businesses and start-ups, and we need to maintain an environment in which they can flourish and provide innovative products—while, of course, not letting them off the hook for substandard offerings.
The noble Lord, Lord Stevenson, made a number of good points, but I feel, as does my noble friend Lord Clement-Jones, that the proposals in his amendment could have unforeseen effects. A short-term right to reject intangible digital content and strict limits on the numbers of repairs and replacements would not be practical in the complex world we live in. In the digital environment, a fault in one copy of digital content may be replicated in all copies, or the fault may not be a result of an action by the trader at all. That is why a repair is a more equitable solution in the first instance than a full refund.
There are also issues around the practicality of “returning” intangible digital content. I think the noble Lord, Lord Stevenson, is suggesting that there should be an obligation on the consumer to delete digital content and on the trader to provide a refund. I do not believe it would be equitable or necessary to impose such a burden on consumers, who may not be technically savvy enough to achieve this—or not without assistance from the content supplier. Of course, many forms of digital content are quickly used, so the consumer may already have taken advantage of the digital content as much as they intended—for example, having viewed the film or read some of the e-book—before they reject it. There is a high risk that a short-term right to reject would therefore push manufacturers towards more restrictive data management techniques that would not be in the best interests of the consumer. Or it could cause the industry to be more conservative in its product offerings, reducing our competitiveness. Innovation would be chilled.
Looking to the future, it is also worth considering the moves in Europe towards a digital single market, and remembering that digital content is commonly sold across borders. The short-term right to reject is a domestic law; there is no short-term right to reject in the consumer sales directive from which many of the goods remedies derive. If we went ahead with a short-term right to reject intangible digital content, we could be out of step with Europe, creating problems for our manufacturers who want to sell across borders.
I believe that, although there are attractions in providing a short-term right to reject for digital content where it does not form part of goods, this would tip the balance of the Bill too far the wrong way. Indeed, it would be to the detriment of consumers, who would suffer from, at the very least, restricted product offerings and higher prices. I therefore ask the noble Lord to withdraw his amendment.
I thank the Minister for her full reply. I would like to come back on one or two of the points that she mentioned. I also thank the noble Lord, Lord Clement-Jones, for coming at me with rather less venom than he threatened me with outside the Chamber beforehand, when he implied that I would be mad even to stand up and make my speech. The bark was rather worse than the bite on this occasion, particularly as I have now discovered that, even though he had the correct item in his hand, he misquoted my noble friend Lady King. My noble friend is incredibly adept on the iPad, and was able to summon up the full quote, and of course it was about a different issue. I shall have words with my noble friend Lord Knight later: he gets quoted too often on these issues and, as I have discovered, he is not always sound on some of the points that we want to put through.
I think that this debate will come back and haunt the Government. As the Minister argued the case, she was worried that a two-tier market might develop. But it is the other way round, is it not? Thinking forward—because I do not think that we are in this position today—if a situation arose whereby the industry was regularly supplying intangible digital material that was defective and faulty, or was causing bugs or causing machines to close down, consumers would be disadvantaged. If they could get a remedy when they had ordered the material in a physical format but not when it was in an intangible format, there would be a two-tier market. That is what I am trying to get at here: I think we are on the wrong track.
I know that this is difficult, and I understand the problems. The way in which the industry operates is obviously very fast-moving, and the situation may well change. But that also has another side. If it became the norm that there was a redress that included the right to reject, I am sure that the industry would come up with different ways of doing things. Simply to argue that the industry is peculiar and difficult in some way, and therefore needs special treatment, does not take the trick. To threaten that we might be out of step with some future European directive is not, I am afraid, a very robust argument. Nevertheless, I accept the logic of the situation. I am defeated by the threat made by the noble Lord, Lord Clement-Jones, outside the Chamber and I beg leave to withdraw the amendment.
Amendment 16 withdrawn.
Clause 34: Digital content to be of satisfactory quality
17*: Clause 34, page 22, line 29, at end insert—
“( ) For the purposes of subsection (2), a reasonable person shall be taken to be aware that certain types of digital content commonly include minor defects which do not have an adverse effect on functionality.”
My Lords, my noble friend was kind enough to quote me in her previous response, so I hope that she will go even further than that and accept an amendment from me. One lives in hope. I am indeed returning to the fray on the subject of software. I hope that when the noble Lord, Lord Stevenson, reads Hansard he will realise how accurate my quote from the noble Baroness, Lady King, was.
I did not say it was inaccurate; I just said that it was not the complete phrase as recorded. The reference that my noble friend showed me was to bug fixes; it was not about the particularity of the need for a separate regime for returning material to digital suppliers because it was defective in some way.
Logically, one thing follows another. That is exactly the purpose of this amendment. Indeed, I shall refer again to the speech made by the noble Baroness, Lady King, on 20 October, as recorded at column GC 183 of Hansard. It has been extraordinarily helpful in formulating the terms of this amendment.
Let me explain. Amendment 34, tabled in Grand Committee, sought to amend Clause 34 to include a provision stating that it is common for computer software to include defects due to its dynamic nature and the complex environment in which it operates. In response to that amendment my noble friend Lady Jolly asserted that,
“the Bill is flexible enough to cope with”,
the differences between complex software and simpler forms of digital content such as music. She said that “reasonable consumers” understood that complex content contains bugs, and that,
“freedom from minor defects is an aspect of satisfactory quality only ‘in appropriate cases’”.—Official Report, 20/10/14; col. GC 184.]
The Minister was clear about this in Grand Committee, but, as the Federation Against Copyright Theft has said, it is far from the case that a district court or a county court would be clear about it.
In the debate, the noble Baroness, Lady King of Bow, suggested that,
“it seems reasonable to say that where minor defects in software do not affect the overall functionality of the product, that digital content should not be deemed unsatisfactory”.—[Official Report, 20/10/14; col. GC 183.]
I agree—and the software industry agrees, and very much supports this approach, as it is much more outcome based. We have reformulated the amendment as a result, and it now says that as long as the defect does not affect the main functionality of the digital content, it should not be regarded as rendering it unsatisfactory.
My noble friend Lady Jolly questioned in Grand Committee what the driver for industry would be to improve the software if the legislation stated that some types of software contain bugs and, as such, this would not mean that the digital content was faulty. However, it is in industry’s commercial interest constantly to improve its products. In fact, to the contrary, the clause as formulated might have an adverse effect in encouraging industry not to make changes or improvements to its digital content. The consequences of strict compliance are likely to be increased costs to consumers and slower product evolution, arising from the increased time and resource required for testing. It is preferable for consumers and businesses to require that minor defects or malfunctions that may surface as a product or service is used be fixed as promptly as possible.
Amendments 18 and 19 aim to remove the risk of claims in relation to minor software glitches. Such claims are potentially expensive and time-consuming for software providers to resolve and would not benefit consumers. In Grand Committee, Amendments 37 and 38 sought to amend Clause 36 to clarify that the presence of bugs in complex types of digital content does not mean that the content is not as described. My noble friend Lady Jolly responded by commenting that,
“digital content either meets the description or … not”,
and that the amendments would undermine,
“the requirement that the digital content should be as described”.—[Official Report, 20/10/14; col. GC 186.]
My noble friend provided a simple example of a defect in software where the spellchecker no longer worked yet the software was described as having this function. With all due respect, the spellchecker example is very simplistic. It is a different situation with regard to complex software such as security software, which has to evolve over time and needs to be updated to address the myriad situations to enable the software to continue to interface with other third-party software and platforms, to continue to function or to address new vulnerabilities.
These issues were discussed during the debate in Grand Committee on Amendment 40A, moved by the noble Lord, Lord Haskel. His amendment would have amended Clause 40 to enable suppliers to make modifications to the software if they are of benefit to the consumer, remedy risks or improve functionality, irrespective of whether the modification would mean that the digital content no longer meets that description. I am pleased that the Government have partially relented on that and that, as a result, we now have government Amendment 20 to Clause 40. The supplier can now add functionality but software suppliers will still not be able to remove features. Neither Clause 36 nor Clause 40 takes into consideration that certain features may have to be removed or disabled from security software. Suppliers of security software may have to remove a function as it is in the very interest of a consumer to do so, as the function could be vulnerable to attack and this specific vulnerability could leave the consumer open to a range of threats—from a virus that will steal personal information or credit card details to malware that will infect a user’s machine, rendering it unusable and/or wiping data such as precious family photos.
Functions of security software are not removed without good reason. If suppliers do not remove a function, there are many circumstances where this will be to the detriment of consumers. I hope that my noble friend will recognise the particular circumstances of software and give her approval at least to the tenor of these amendments. I beg to move.