Report (2nd Day)
Schedule 2: Consumer contract terms which may be regarded as unfair
29: Schedule 2, page 58, line 2, at end insert—
“20A (1) A term which has the object or effect of permitting a trader engaged in the provision of fixed broadband internet access or mobile internet services to block, restrict or otherwise hinder the access of a consumer to any lawful electronic communications network or electronic communications service on the basis of an unreasonable or unusual definition of “internet access”, “data”, “webaccess” or similar word or phrase.
(2) Nothing in this prohibition shall affect filters for the purpose of child protection.
(3) “Electronic communications network” or “electronic communications service” shall have the same meaning as provided in section 32 of the Communications Act 2003.”
My Lords, Amendment 29 was moved, as Amendment 56B, in Grand Committee by the noble Baroness, Lady Thornton, and supported by the noble Lord, Lord Best, and my noble friend Lord Stoneham. It is an important amendment and, although I was not able to be in Grand Committee, in view of ministerial replies and subsequent statements by Ofcom, the Internet Telephony Services Providers’ Association and I thought that it deserved a better answer.
The amendment is designed to prevent ISPs blocking or discouraging use of services within the legal internet that compete with their own. It would prevent mis-selling of internet services and strengthen the power of the open internet code. At the core of the problem is consumers’ understanding of the services they should rightly receive within their internet contract. Customers assume that they can use all internet services, when in actual fact there are either specific terms and conditions preventing use of services like VoIP or extra charges are incurred to do so.
At present, internet service providers have no obligation to allow their customers to access the entire legal internet, despite selling internet access to their consumers. Some mobile operators have used this to block, degrade, impede or surcharge certain services simply because they compete with their own. It is very much in the interests of consumers and the economy that internet users have open access to all the legal parts of the internet, on the basis of fairness for consumers and to facilitate innovation in online services.
Although it disapproves of this anti-competitive behaviour, Ofcom has repeatedly stated that it does not have sufficient powers to prevent the blocking or surcharging of internet services. The amendment would resolve this problem by creating consequences for ISPs that claim to offer internet access but then restrict what the internet means through terms and conditions. The amendment dovetails with the industry’s open internet code of practice to ensure that the UK maintains an open internet for both consumers and industry, but the code is effective only if Ofcom is able to intervene if it is breached. Nothing in the amendment restricts the ability of ISPs to block access to illegal material or implement content blocking at the request of the customer.
The Government have put forward a number of arguments against the amendment, saying that the UK communications market is extremely competitive and consumers can switch if they are not happy. However, Ofcom’s own research in September 2013 clearly outlined that consumers were not aware of traffic management practices undertaken by ISPs and whether these would affect specific services that they use via their internet service.
The Government also say that the necessary steps are in place for the creation of both the transparency code of practice and the open internet code of conduct, which the vast majority of industry has signed up to. The open internet code is a good code but on its own does not have enough teeth.
The Government say that powers already exist within the Bill. The DCMS seems to believe that the Bill has the powers to resolve the issues of concern. But on 4 November, Ofcom’s CEO Ed Richards gave evidence to the Commons Culture, Media and Sport Committee. In response to a question from Philip Davies MP, he stated that Ofcom did not believe that it had “definitive powers” to prevent blocking. He went on to say that he thought it would be “better” if Ofcom did have such powers. These views are consistent with the views expressed by Ofcom to ITSPA over the past three years. Whether or not Ofcom is right is by the way. If it is not confident that it has the powers, it will not act.
Ed Richards reiterated the view that Ofcom does not currently have clear powers to prevent anti-competitive blocking behaviour on 18 November in a further evidence session to the House of Lords Communications Committee, of which I am a member. I said:
“There has been a debate about blocking by mobile operators of VoIP services and so on. Do you think you should have the ability to be clearer in your requirements, effectively, in legislation?”.
Mr Richards replied:
“My preference and the preference that I have articulated on Ofcom’s behalf before is that it would help us if we were crystal clear that should we think it was necessary we could stop the blocking of access to legal sites”.
He went on to say:
“There are different circumstances that one would want to make sure you had assessed and thought carefully about first before invoking it, but a backstop power to make sure that you could stop genuinely bad behaviour that was misleading the public about what they were buying feels to me like the sort of power the regulator should have”.
Is the Minister going to say that the CEO of Ofcom is wrong and that it should be denied these powers?
It is very disappointing that despite my noble friend Lady Jolly’s offer in Grand Committee to convene a meeting before Report, the meeting on this amendment with the Minister Ed Vaizey will not take place until Thursday 27 November. Even though that discussion has not yet taken place, I hope that the Government will consider their position, especially in the light of the strong statements by the CEO of Ofcom on at least two occasions. I beg to move.
My Lords, like the noble Lord, Lord Clement-Jones, we support an open internet, and it is in that spirit that we have signed up to the amendment. There is a case here for the Government to decide where they think the legislation currently lies, and if it is not clear that Ofcom has the powers that the noble Lord spelt out in some detail, it is important that this is resolved.
I think that it would surprise many people to learn that internet service providers have no obligation to allow their customers to access all the legal internet, despite selling “internet access” to all their customers. If DCMS believes that both existing legislation and new additions within the Bill resolve the issue of mis-selling, it is important that the Government agree with us that clarity should be made beyond peradventure. We need to know whether Ofcom is right that it does not have the powers, in which case the amendment will resolve that. If DCMS and Ofcom agree that the necessary powers do exist, DCMS should say so publicly and make it clear beyond any doubt that Ofcom has the necessary powers to act on any relevant open internet infringements. I look forward to hearing what the Minister has to say.
My Lords, the debate on this important issue in Committee was a very good one, as my noble friend said. The discussion focused more on the protections for net neutrality than on the specifics of this amendment. I sympathised with the points made and committed to a meeting to discuss them. I thought it important that the relevant interested parties were present, especially Ed Vaizey, the Minister for Culture and the Digital Economy. His diary proved to be completely immovable. The meeting is now in the diary for this Thursday and I am looking forward to it.
It is clear from the discussions so far that this is a really complex area, and one which is causing a great deal of debate both in Europe and across the Atlantic. We believe that we are global leaders in delivering open internet services. In the UK, a competitive market, effective self-regulation and consumer expectation have delivered a much more open internet than perhaps elsewhere.
As noble Lords may be aware, industry has developed two self-regulatory codes of practice—both now with full sign-up from major ISPs, with Vodafone, EE and Virgin Media signing up to the open internet code in recent weeks. This is the code that governs their behaviour and ensures that they do not block services that compete with their own. Mobile operators that restricted some services such as Skype no longer offer new packages that do so. Ofcom, the regulator, has been in dialogue with the provider whose behaviour this clause attempts to address and there is a commitment to review the wording in its terms and conditions to ensure that these are not misinterpreted in any way.
Critics of this self-regulatory regime will say that there is no penalty for falling foul of the open internet code and that ISPs can change their mind about being signatories at any time. While this is true, it is also the case for many other areas that are self-regulated, for example in online advertising, where great strides have been made to ensure a transparent sector. However, it is also true that in the two and a half years since the open internet code was agreed, no breaches have been reported. If there is a significant change in the number of signatories or we see common breaches reported, the Government will look at this again. Consumer expectations are such that we do not envisage this happening again.
In answer to my noble friend’s comments, we have discussed these issues with Ofcom. We agree with Ofcom that there may be some room for interpretation regarding its powers in this area. However, we do not believe that the amendment would deliver the intended restrictions on internet access providers. Furthermore, Ofcom’s analysis of the market for internet access services suggests that there is not an urgent need for intervention. The market is continuing to move towards the comprehensive provision of neutral open internet access services, and there is no evidence of present consumer harm. Therefore, for the time being, and because of the recent developments in this area, we see no evidence of the need for legislation.
However, by way of reassurance, as noble Lords will know, Clause 64(2) in Part 2 of the Bill means that providers will be unable to hide definitions of the service provided—such as broadband access—in the small print, and will have to give them due prominence. The Bill also retains the protections currently in force through the Unfair Terms in Consumer Contract Regulations 1999, which give regulators the powers to tackle such abusive behaviours, if proven. We are also taking a power in the Bill to allow us, after parliamentary scrutiny, to update the grey list. This means that were consumer or trader behaviour to change, or evidence of particular consumer detriment to emerge, we could add terms to the grey list to accommodate that. That could apply in this case should changes by providers not take place or we see a shift in provider behaviour across the board that is not currently evidenced. That means that ISPs will not be able to hide any clauses and that there is a route for action for regulators, should this prove still to be an issue. I believe that that is a more appropriate way to deal with this than legislating at this point, especially given that this is being addressed by the regulator.
We should also be aware of the ongoing process in Europe regarding net neutrality as part of the telecoms single market package. The Government have always championed the self-regulatory approach, but we recognise that not all markets are the same as the UK’s and that there is growing demand for further protections for net neutrality from other member states. It is clear from the European Council that there is the will to include text on net neutrality. We will continue to engage proactively with the European Council on that, and believe that an appropriate solution can be found. The latest text from the Italian presidency shows movement towards a more principles-based and outcome-focused approach, which we believe would be more appropriate.
To conclude, while I am sympathetic to the intentions of the amendment, the Bill is not the right place to do this. Telecoms regulation needs to be handled through telecoms legislation. We do not believe that the amendment will change the regulator’s power in this area; nor do we believe it be necessary at this time, given the market developments. We will continue to engage with the EU in a constructive manner.
I commend my noble friend’s persistence on the issue. The Government are unable to accept his amendment, but I hope that I have offered sufficient assurance to persuade him to withdraw it.
My Lords, I thank my noble friend for that reasonably comprehensive response. Although I do not agree with large parts of it, it was comprehensive. It is interesting that the Minister, along with others, seems to have confused the issue of the open internet with net neutrality. They are rather different issues. It will be useful to have that discussion on Thursday. This is not a net neutrality amendment. It is about the enforcement of the open internet principles. I shall not take up the House’s time by explaining the difference, but it is considerable. The Minister’s meeting with me and the industry on Thursday will be helpful.
The Minister’s reply was a mixture of, “The problem has gone away”, “Voluntary agreements will do the business” and “We don’t need the back-up”, but the bottom line, which I find quite baffling, is, “We don’t agree with Ofcom”. The CEO—albeit the outgoing CEO, who may be more frank than an incoming one —was very clear about the powers that Ofcom did and did not have and what he thought was appropriate.
I do not know what discussions there have been between DCMS and Ofcom, but a dialogue of the deaf seems to be going on. I understand what my noble friend said about this not being an urgent need, but I do not believe that the CEO of Ofcom would have gone on the record twice—first on 4 November with the CMS Select Committee and then a fortnight later with the Communications Committee of the House of Lords—unless he thought that this was a live topic.
I note the slightly comforting words of my noble friend that under Clause 64 no small print will henceforth be allowed and that there will be no hiding place. I cannot remember the exact words that she used, but they were ringing phrases. I hope that they will have some substance. There is scepticism whether they will bite in the way my noble friend outlined. We shall see.
As the discussion with the Minister has not yet taken place, I reserve the right to bring this matter back at Third Reading if absolutely necessary but, in the mean time, I beg leave to withdraw the amendment.
Amendment 29 withdrawn.
30: After Clause 77, insert the following new Clause—
(1) This section applies to the regulators which are involved in protecting consumers (“consumer regulators”).
(2) It shall be the duty of the consumer regulators to uphold the rights of consumers under this Act.
(3) In exercising their functions, consumer regulators shall have regard to the desirability of—
(a) upholding accurate, plain and intelligible information for consumers about goods and services;(b) promoting—(i) fair and reasonable practices in the selling of goods and services;(ii) fair and reasonable pricing of goods and services;(iii) the inclusion of comprehensive information on goods and services in contract;(iv) quick and fair means for consumers to make complaints and have disputes resolved.(4) Consumer regulators shall have a duty to consider whether a proportion of any fines levied for breaches of rights under this Act shall be used to compensate consumers.”
My Lords, I beg to move Amendment 30. I think it would be helpful if I read it out at this early stage. The proposed new clause states that the section involved applies specifically,
“to the regulators which are involved in protecting consumers”—
that is, “consumer regulators”. The proposed new clause continues:
“(2) It shall be the duty of the consumer regulators to uphold the rights of consumers under this Act.
(3) In exercising their functions, consumer regulators shall have regard to the desirability of—
(a) upholding accurate, plain and intelligible information for consumers about goods and services;
(i) fair and reasonable practices in the selling of goods and services;
(ii) fair and reasonable pricing of goods and services;
(iii) the inclusion of comprehensive information on goods and services in contract;
(iv) quick and fair means for consumers to make complaints and have disputes resolved.
(4) Consumer regulators shall have a duty to consider whether a proportion of any fines levied for breaches of rights under this Act shall be used to compensate consumers”,
who may have suffered loss or inconvenience as a result of that.
The amendment proposed previously by the noble Lord, Lord Clement-Jones, shows that it is time that this matter was reviewed. This is an important Consumer Rights Bill which in many other ways will be of great benefit to consumers. It would be a great pity for it to go ahead without recognising and dealing with the anomaly which exists.
Under the Bill, the regulators are not required to exercise certain functions that one would expect them to exercise. I make it clear at the outset that I am not complaining about, or accusing, the current regulators. I am saying that their attention has never been drawn to this particular role. It is a new role as far as they are concerned. I am very grateful to the National Consumer Federation which has helped me to draft this amendment and, by the way, gets no money from anyone. The federation covers all the other consumer organisations and has gathered all the necessary information in giving this amendment its warm support.
I shall deal as quickly as possible with my reminiscences but I remember that, when we first privatised a public industry—the electricity industry—we received a report from the Monopolies and Mergers Commission saying that the electricity boards did not satisfy consumer needs, their prices were too high and their labour forces were not treated correctly. At last the moment had come to do something to benefit everyone—consumers, employees and the general public. I well remember that not long after the Bill became law, I needed some electrical work done in my home. Along came a nice man from the new electricity company and I said to him, “I hope you are feeling much happier these days in your place of employment”. He replied, “I am not worried at all. I have bought shares”. So I have a very big kite to fly in that respect.
It is obvious that many practices today that regulators come across, such as the ones highlighted in previous amendments, are new. The marketplace, as it were, has changed completely as far as they are concerned and the Bill is the place to stress that there is a very important consumer role. That is why the end of the amendment, which is one of the most important parts, says that consumer regulators shall have a duty to consider whether, if consumers have been harmed or in some way not been given a fair deal, any fines levied should be used to compensate consumers. To my great delight, one regulator did that recently when a big fine was imposed and now £3 million of the fine is to be repaid to those consumers who had suffered either financial loss or other types of problems.
It seems to me that they do not need the Government or the law in order to do that—they could do it themselves—but it will help to have it firmly in print that they may. I do not know what negotiations they went into with the Treasury but they must have been very interesting indeed. People often say to one, “Oh, these regulators, what do they do with all the millions?”. Noble Lords probably know already that the money goes straight to the Treasury, and the Treasury is not by any means an easy nut to crack. They did very well indeed to get that amount repaid to those consumers who had suffered. I want that also to be part of the law and I want it to be a consumer right. That is not a great deal to ask for. It is long overdue. I commend the amendment to the House.
My Lords, I support Amendment 30, which has been moved by the noble Baroness, Lady Oppenheim-Barnes, which would ensure that regulators did what they are meant to do, which is to protect consumers and promote their interests.
I shall speak also to Amendment 50C, which is in my name and that of my noble friend Lord Stevenson of Balmacara. Our amendment would require statutory regulators to develop proper user or consumer representation on their boards, as well as reviewing annually the consumer experience of their industry, including whether consumers were sufficiently well represented and listened to so that their rights under this and other legislation were protected and, indeed, promoted. It would enable regulators to consider whether a levy might be needed to ensure that the consumer voice was clearly articulated.
Regulators exist in exactly those industries where the consumer cannot get a fair deal on their own behalf, either because of effective monopolies of the sort that we have just heard about or because the nature of the service is so complicated, long-term or specialist, such as in financial services or the law, that clients are in no position to evaluate it or to shop around. Despite this, not all regulators put the consumer, in whose interest they are meant to be working, first—sometimes because of industry capture, sometimes because they work at such a helicopter level that they fail to see the real consumer impact, and sometimes, as the noble Baroness has just said, because something new comes along and they are not feeling it from the grass roots up. Usually, however, it is because they do not embed the end-user’s views in their decision-making. They decide policy without researching the consumer’s experience or the consumer’s views, and they sometimes do not seem to understand the ordinary person who pays the bills. Our amendment would embed the consumer voice in the regulators’ governance, where it should have been from the start.
However, the noble Baroness, Lady Oppenheim-Barnes, has a rather craftier alternative, which is to place a duty on the relevant regulators to uphold the rights of consumers and to raise the possibility, as she has just said, of the fines levied by a regulator being used to compensate consumers for breaches of their rights. Given the £1.1 billion fine levied by the FCA last week, that part of her amendment has a particular attraction.
Without these amendments, the Bill will lack a certain crack of the whip in the hands of regulators. I therefore hope they get support.
My Lords, I start by applauding the contribution made by my noble friend Lady Oppenheim-Barnes in promoting consumer rights. She has outlined her concerns and given her views on what the regulators can do to help consumers, reading from her amendment. Given how much impact her work has had, her input will be invaluable in ensuring that we have a better understanding of what needs to be done when we start the implementation phase of this important Bill.
It is, of course, important that consumer rights in regulated sectors, just as in the rest of the economy, are protected and promoted; that consumers are given sufficient information to make informed decisions; that they are aware of how to make complaints and seek resolution to disputes; and that they have suitable representation to secure the best possible outcomes. The noble Baroness raised some important issues with this amendment and in our meeting.
However, I am concerned that this amendment would, first, complicate an already complex legislative and governance framework, through which regulators operate, with a number of new rules and requirements. Rather than helping consumers, it could muddy the waters further and lead to complex, unclear decision-making by regulators.
Secondly, it could perversely duplicate the extremely good work already being done across the consumer landscape. There are already various bodies and organisations fulfilling the objectives of this amendment, which I will explain in more depth shortly. In view of the comments made by the noble Baroness, Lady Hayter, I should add that similar concerns relate to Amendment 50C, although that comes from a slightly different angle and would provide, in some circumstances, for a levy.
We must not overlook the good work that economic regulators have done. As noble Lords may know, economic regulators have a statutory duty to take consumer interests into account. The nature of independent regulation means that consumers are at the heart of what they do, and I am confident that this remains the case. If anything, the tone of what I have heard suggests that regulators have not been vocal enough about how much their work helps consumers, so let me highlight a few examples. Average monthly household spend on telecoms services fell by 2.9% in 2013. In addition to this, satisfaction ratings across key telecoms markets are close to or over 90%. The majority of consumers remain satisfied with their service overall. Complaints about fixed-line and mobile mis-selling have decreased. In fixed-line, they decreased from 1,200 per month in April 2005 to just over 400 in 2013, and mobile mis-selling has also reduced very significantly. There is now more choice than ever for consumers, with at least 13 major suppliers of bundled residential services, 114 fixed-line operators and four mobile operators.
Ofcom is pushing to make it easier for consumers to switch providers, which is critical for a well functioning telecoms market. Water leaks are down by 40% since the 1990s, so there is a heritage of affordable water bills, with high-quality drinking water and cleaner rivers. Domestic energy bills, while having increased, are still favourable compared to Europe.
The process for speeding up switching energy suppliers is taking place, and we aim to reach the point where people can change over in just 24 hours. Even now, more than 2 million customers switched electricity supplier between October and March, with nearly a third picking smaller suppliers. Ofgem has also investigated and fined energy companies over marketing activities such as doorstep selling, which have a detrimental effect on some consumers.
The warm home discount took up to £135 off electricity bills for 2 million households last winter. There are record levels of passenger satisfaction in our railways, despite the record post-war number of journeys made, and Network Rail is on course to deliver its current programme of investment. Regulators have contributed to all those good outcomes for consumers and are continuing to work in the interests of consumers. Without them and their work, consumers would be much worse off than they are today.
The examples given also show how the regulators can adapt to change—a concern emphasised by my noble friend Lady Oppenheim-Barnes. She mentioned a huge £3 million fine being paid to consumers, and of course the FCA example quoted by the noble Baroness is another good example of regulators adapting to change.
I also reiterate the good work done by consumer bodies. Bodies such as the Consumer Council for Water, the Communications Consumer Panel and Citizens Advice were either established through legislation or are registered as charities. Statutory regulators such as the Civil Aviation Authority have also created independent, internal consumer panels to challenge and advise on policy from a consumer interest perspective. All those bodies play a huge role in helping consumers, meeting the very objectives behind these amendments—in particular around providing intelligible information and having consumer representation on regulators’ governing bodies to get a better deal for the consumer.
There are examples where consumer bodies have had real bite. The Consumer Council for Water negotiated with 11 water companies in response to rising profits for them and rising bills for consumers. Thanks to those discussions, the water companies have agreed to return £1 billion of that financial gain to consumers. Another result of CCW pressure is the fact that all but two water companies submitted plans in December 2013 pledging to keep prices at or below inflation until 2020. The number of complaints to water companies has reduced for the fifth successive year, and the CCW played a crucial role there.
As I have said on many occasions, Consumer Futures, now part of Citizens Advice, has done a huge amount on behalf of consumers to secure the best deals for them in industries such as energy and post, and to help with redress. For example, the strength of its advocacy and evidence led to Ofcom reversing its original decision and secured a price cap for second-class mail, providing real security for those who rely on sending letters and who are financially disadvantaged. It also constantly keeps energy companies on their toes. It helped secure £55 million of repayments by npower due to unfair billing charges; npower has said that it is investing £20 million to resolve those issues fully.
Let us not forget the superb work of Citizens Advice, because its job is to provide consumers with intelligible information across a wide range of sectors. Its success has been outstanding, and it works across all the utility sectors that these amendments are designed to address. It has helped millions through its website and over the phone; 86% of consumers reported a positive impact of advice on their lives, and 84% said that their understanding of their rights had increased.
The regulators and the consumer bodies uphold the rights of consumers, providing sufficient representation to them and promoting fair and reasonable practices. As such, I do not think these amendments would, in practice, achieve anything that is not already being done. They are more likely to bring harm than benefit. Regulators already operate within a complex legislative and governance framework. One of the key things that the Government can do to help is to make sure that the duties we ask the regulators to perform have real clarity and focus. The more duties we place on them, or the more we prescribe, the harder we make life for the regulators. This, sadly, has practical consequences that are bad for consumers.
Regulators may take longer to make their decisions with the sorts of changes under discussion. They might face a greater risk of legal challenge on the grounds that they have allegedly not taken account of all elements of their duties, even when they have acted in the right way. This is to the detriment of everyone, including consumers, and benefits only the lawyers. The cost of regulation itself would increase. Investors would look at regulated markets and factor in the greater risk to them of protracted regulation, which means higher costs. These higher costs find their way to the consumer’s bill.
In summary, I have enormous sympathy with the good intention behind these amendments. However, I strongly feel that there is a lot of good work already happening—it has obviously taken time—to promote consumer rights and representation in our regulated sectors. The consequences of adding these duties to an already complex legislative framework for regulators are likely to be worse outcomes for consumers and business at a time when there is a drive to cut the costs of regulation and increase efficiency, which passes through to the consumer.
Again, I salute the wonderful work being done by both noble Baronesses, and would be happy to meet them to discuss these issues in more detail as we get closer to the implementation phase. In the mean time, noble Lords can feel assured that much is already being done across the board to help consumers. I would ask the noble Baroness to withdraw her amendment.
I thank my noble friend for that very detailed reply. I wish I felt comforted, because I know she has spent a lot of time on and paid a great deal of attention to the issue. She said that these amendments might muddy the water. The problem is that the water is already muddy and the purpose of the amendment is to make it absolutely clear what the duties of regulators are in relation to consumers, along with all their other important interests. The effect of any practices that are being carried out by these industries which regulators have not seen, or have not thought that it was within their remit to deal with, is what this amendment clarifies.
Also, the Minister has rightly mentioned that most of these industries now have consumer representatives, or little personal consumer bodies. I would ask her only to try to get hold of one of them on an expensive 0845 number. They may work very hard but they do not have any powers of their own. I do not want that to be the way things happen—I prefer my amendment to that prospect. I do not want regulators to be hampered in the other important work which she has illustrated that they do. The great fines are not feathering their own nests; the regulators are doing what they consider to be their duty. I just want them to be given a new duty, and this amendment defines and clarifies it. I would like to consider this between now and Third Reading. There is a lot still to be done. However, for the moment, I beg leave to withdraw my amendment.
Amendment 30 withdrawn.
Schedule 5: Investigatory powers etc.
31: Schedule 5, page 81, line 14, leave out sub-paragraphs (3) to (11)
My Lords, Amendment 31 stands in my name and those of the noble Lord, Lord Best, and my noble friend Lord Stevenson of Balmacara.
Rather strangely, as the Bill stands, trading standards officers—who work on behalf of consumers to track down rogue traders, dangerous goods, scams and rip-off merchants—would lose their existing powers to inspect premises, unless they give two working days’ notice of such visits in writing. Because of the outcry over this nonsense when the Bill was in the Commons, the Government have already had to amend it so that officers can still enter without forewarning, either where there is suspicion of malpractice or where evidence might be destroyed. But that is always the case with evidence: it goes walkies when the police or trading standards are anywhere near.
Despite the slight amendment made in the Commons, the requirement for 48 hours’ written notice would still tie the hands of trading standards officers. This new requirement was written into the Bill, despite the fact that there were no calls at all for this change from business, and no evidence that officers misuse their current powers. While it is true that some companies quite liked it once it was suggested, none had demanded it. Meanwhile, enforcement agencies and consumer groups naturally want it removed. If the Government really want to help small businesses ensure that the right people and the right paperwork are ready for a visit, fixing it up by phone to suit the company would be much better than sending two days’ fixed notice by post, with no negotiation over the date. The Bill also does not deal with the difficulty of giving notice to mobile traders.
Even if we win a vote on this amendment, which would remove the need to have 48 hours’ written notice before trading standards could inspect, it does not mean that trading standards officers cannot give notice before they inspect. In fact, they would do so in very many cases. It is good practice to do so, but it would also save trading standards officers’ time: they would not have to go back a second time if the paperwork was not there. However, it makes no sense to give notice to people who are potentially breaking the law of when the enforcers will turn up to check on them. That would hamper the enforcers’ ability to tackle rogue traders, since unannounced visits can act as a deterrent, as well as a source of evidence.
Of course, these very same officers do not have to give notice for food safety: they can have unannounced visits. Ofsted can also make unannounced visits. Just last week we saw the impact of a surprise inspection of Colchester hospital by the Care Quality Commission, which led to major steps to safeguard patients. That might not have happened had the hospital management been given two days’ warning. Why must trading standards replace today’s on-the-spot checks with two days’ written warning? How difficult would it be for the very same officer to have different powers for entering the same premises, depending on which breach they are investigating?
The Government have said that a trading standards officer can always enter premises as a member of the public and see what an ordinary shopper can. However, retailers do not put their untaxed or counterfeit cigarettes on top of the counter or out on the shelves. Unsurprisingly, they are hidden below the counter, where an officer would not be able to look. It is not just consumers and trading standards officers who want the 48-hour requirement removed: small firms also dislike competitors undercutting them by underhand means. Indeed, the Tobacco Retailers’ Alliance—I do not often speak on behalf of anyone to do with tobacco, but it is right on this—has written, saying that it is,
“disappointed … that… the Bill … gives a retailer suspected of selling smuggled tobacco 48 hours’ … warning of having their premises inspected”.
It says that that seems,
“madness ... As legitimate retailers, we do not require any notice of an inspection. You can come in whenever you like”.
It says that the provision plays into the hand of retailers who break the law, allowing them to carry on selling smuggled tobacco after inspections. It urges the Government to remove this provision from the Bill and let inspections be carried out without warning so that they are an effective deterrent to those who sell smuggled tobacco.
He is not in his place, but the noble Lord, Lord Blencathra, wrote back to the retailers concurring with their view. He said there is no justification for giving 48 hours’ notice of an inspection of a tobacconist’s shop. It is not as though it is an intrusion into your personal home. Writing in the Grocer, the chairman of a large cash and carry store noted that independent retailers say that,
“test purchasing is less effective if there has to be 48 hours notice of a visit”.
As serious is the fact that there will be fewer inspections because trading standards officers are bound to become risk-averse where they have to articulate and document the evidence of their suspicion or malpractice, or the likelihood of loss of evidence, particularly in cases where, despite the reassurance the Minister gave us, evidence tends to come anonymously from other retailers. We know that a challenge in court that inspectors visited without reasonable evidence or gave proper notice in writing could cost their local authority heavy legal fees should they get tripped up by some clever lawyers, even if the inspection then found a breach of consumer law.
We are talking about the sale of dangerous goods, such as flammable mattresses, ineffective carbon monoxide detectors, dangerous toys, dodgy electrics, fake bags and jewellery and rip-off household goods. Trading standards officers stand in our shoes as consumers protecting us against these.
Amendment 31 would remove the Bill’s requirement for trading standards to have to give 48 hours’ written notice. As Giles Roca, director-general of the TRA, asked,
“why change a system that works perfectly well?”.
The Government were unable to answer that in Committee. Instead, they have come up with further amendments today which rather demonstrate that they accepted our arguments in Committee but dare not quite say so. Therefore, they have invented a new term: “a routine inspection”. The Trading Standards Institute, which carries out a lot of the work for the Government, does not recognise that term and does not know what it is. The Trading Standards Institute says it is very happy to give notice of routine visits to advise traders but that is not an inspection visit and it does not know what a routine inspection visit is. In fact, because of the cuts to the number of trading standards officers—I think there are 50% fewer than there were—and the move to an intelligence-led approach, only the older ones can even remember routine visits taking place.
Inspection visits are to find evidence. This will be curtailed if two days’ warning of the inspectors’ arrival has to be given. Why are the Government asking trading standards officers, who act on behalf of consumers, to work with one hand tied behind their backs? I beg to move.
I have to inform the House that if this amendment is agreed to I cannot call Amendments 32 to 40.
My Lords, I support the amendment that has just been spoken to. I declare in interest in that I am a vice-president of the Trading Standards Institute and I have been the president so I have a long understanding of the work of trading standards people up and down the country. They have been extremely useful in every development of consumer rights and consumer law over the many years since they were called weights and measures inspectors under the old rules of 1880. Now that they are trading standards inspectors and the Trading Standards Institute is a very respectable body, they have as a prime function the enforcement of consumer law. That is so now, although the substance of the law has been altered and is being altered further by this Bill.
One of the principal jobs of enforcement officers is, of course, to see whether a prosecution is justified. No self-respecting prosecutor thinks that any minor infringement of the law is deserving of prosecution and the trading standards officers in each county are well aware of that. They take a great deal of care in developing their thoughts that on a particular occasion the goods are dangerous, or the various things that my noble friend Lady Hayter referred to have occurred. To my mind, there is no doubt whatever that it is a far greater deterrent to malpractice if no notice has to be given of an inspection. I was delighted, as I am sure many of us here were, whether interested in this subject or not, with the announcement of the work done by Ofsted in deciding that there are some occasions when schools need to be looked at without notice so that they can be taken off their guard and it is more difficult to show that they are all to the good.
Trading standards inspectors have tasks other than prosecution. I was thinking of this when the noble Baroness, Lady Oppenheim-Barnes, was talking about the previous amendment. They do a great deal of advisory work and advise not just consumers but businesses. That is at least equally important because they are advising businesses on how to comply with the law, how to better comply with it and how to make sure that they do not suffer from prosecution in the future. In their advisory capacity, inspectors make sure that the right relationship is obtained with the trader concerned and notice may be given that they wish to come and talk about a particular problem and they hope their advice will be looked at and taken. There is a world of difference between advising and prosecuting. We can all see that and surely there is no doubt that it is far better for the prosecution element of the work of trading standards that visits do not require notice on every occasion.
My Lords, I am delighted to follow the noble Lord, Lord Borrie. I, too, am a vice-president of the Trading Standards Institute. I moved this amendment in Committee because it seemed extraordinary when I first read it that trading standards officers would need to give 48 hours before turning up to find out some wrongdoing on a site, in a shop or whatever. However, the Bill already says that if,
“the officer reasonably considers that to give notice … would defeat the purpose of the entry”,
then the 48 hours’ notice would not have to be given. Nor would notice have to be given if the officer,
“reasonably suspects that there is an imminent risk to public health or safety”.
In Committee we received reassurances from the Minister, who explained that even if there was just a suspicion that there might be something going on, it would be quite in order not to give notice because that would totally undermine the purpose of looking in on the premises. That just leaves the 48 hours’ notice for “a routine visit”, which is how this is expressed in the amendments to follow in the name of the Minister. For a routine visit, 48 hours’ notice would be given but I understand that if trading standards officers are to make a routine visit—probably, as the noble Lord, Lord Borrie, said, to give advice, or to explain that the law has changed and there is something new that the business ought to know about—it will not be a matter of just giving notice. It is a negotiated thing. They will send an e-mail and receive a reply. What is the point of turning up 48 hours later if nobody is there or if the boss is not there and you need to see the boss? If it is something completely routine, this is how people behave just out of politeness, if for no other reason. They will make an appointment and go round and visit. The danger is that this will get blurred, the proper use of the unannounced visit will be inhibited and we will not see justice done when it should have been done. It seems much better if we simply omit this reference to 48 hours’ notice. It was probably a bad idea in the first place. There is a certain amount of retreat from it now—very sensibly by the Minister—but why not just knock it out? It does not seem to serve any purpose.
My Lords, the Government certainly share the objective of an effective enforcement regime to protect consumers from rogues and traders from unfair competition. In this Bill we are, of course, consolidating and modernising the investigatory powers of consumer law enforcers, bringing together the powers from different Acts, and ensuring for the first time that enforcers can tackle rogue traders who operate across local authority boundaries. We have also introduced strong safeguards as to how these powers are exercised because the powers are necessarily intrusive. They allow officers to enter premises, seize goods and break open containers, for example.
Under the Bill, therefore, consumer law enforcers will now have to give notice to traders if they want to make a routine inspection. We introduced this change, following discussion in Committee, because we think it is a basic principle of civil liberties that a business should suffer the disruption of an unannounced visit only when there is some good reason, such as suspicion that a business may have broken the law. However, we recognise that trading standards has real concerns about the requirement to give notice. I want to set out the approach that we have taken in more detail before talking about my amendments.
Businesses, including small businesses, are very supportive of strong powers to investigate rogue businesses, as has been said, because they harm consumers and are unfair to them. However, businesses have told us that unannounced routine inspections by enforcers are disruptive, costly and needlessly so. For example, an officer visiting a shop may demand a lot of attention from staff at busy periods or want information that the junior staff available cannot provide. The Federation of Small Businesses told us that the safeguard of two days’ written notice of routine inspections, which can of course be sent by e-mail, will allow businesses to ensure that the appropriate staff and paperwork are available. This means that neither the trader’s nor enforcer’s time is wasted. For example, if an officer visits a retail store to check centrally set price promotions, store colleagues may be unable to change promotions or answer questions on price establishment periods. Hence, matters that could otherwise have been cleared up quite quickly can result in primary authority referrals or a formal investigation.
Clearly, the Government are aware that much of the vital work of enforcement officers is directed at illegal trading. We very much value the excellent work of enforcers such as trading standards to protect consumers and legitimate businesses from rogue traders—including, I should add, the advisory work that the noble Lord, Lord Borrie, mentioned, which I agree is extremely valuable. Officers clearly should not have to give notice of an inspection where illegal trading is suspected. That is why clear exemptions are set out in the Bill, which I need to go into to try to ensure that the House understands how reasonable our proposals are. As has been said, notice need not be given, for example, if there is an imminent risk to public safety. The noble Lord, Lord Best, explained that clearly.
The exemption would apply: where an enforcer reasonably suspects a breach—for example, where enforcers find evidence of illicit tobacco, such as stubs and papers, in the streets near suspected outlets; where giving notice would defeat the purpose of the entry, a good example of that being where counterfeit alcohol is being sold in local shops and the enforcer believes that the traders in question are likely to conceal the illegal products if notice is given; and where it is not reasonably practicable in all the circumstances to give notice—for example, because the officer reasonably suspects that there is an imminent risk to public health or safety, as the noble Lord, Lord Best, mentioned. There are three or four other exemptions but, taken together, these exemptions ensure that consumer protection is properly maintained because if there is evidence of a serious or immediate breach, enforcers can intervene. The Bill supports an intelligence-led approach to enforcement which is an effective use of enforcement resources.
The noble Baroness, Lady Hayter, said that test purchases were less effective if notice had not been given. However, notice need not be given for a test purchase or to observe the carrying out of business.
Finally, it is worth noting that the police, for example, have no general powers of entry to commercial premises and can enter the premises only with reasonable suspicion or a warrant. Even with the notice requirement, enforcers such as trading standards will still have substantially more powers to enter premises than the police, who also deal with serious crimes. Since the noble Lord, Lord Borrie, mentioned it, I should say that for practical purposes, Ofsted normally gives up to two working days’ notice to further education colleges, and schools are given notice by midday on the working day before the inspection. However, there are unannounced inspections in cases of serious concern, as the noble Lord rightly mentioned.
In Committee, noble Lords were concerned that it was unclear when notice needed to be given. We listened carefully to the concerns raised and we have therefore tabled Amendments 32 to 39, which aim to put it beyond doubt that notice need be given only for routine inspections. Routine inspections under the Bill are any inspections that do not fall within the exemptions. They are typically made where trading standards considers that a business presents a risk, simply due to the nature of the sector in which it operates. Examples include visits to DIY stores and other retail outlets considered routine because there is no reason to doubt that the business is operating properly without any significant breaches of legislation, unless of course the exemptions applied. Such stores sell many different products and, as society changes more and more, services from dry cleaning to kitchen-fitting services. These need to be the subject of inspection from time to time. Notice ensures that the business is properly prepared so that the officer can check that the supporting systems are in good order.
Before my noble friend leaves that point, I wish—possibly—to help her. Is she aware that EU authorities have to give only 24 hours’ notice when coming to inspect a British company and, within that period, that the Secretary of State responsible has to provide supporting police for the inspection?
I am grateful to my noble friend for that factoid, of which I was not aware. Of course, our proposed regime provides for routine inspections and then, where there is a potential problem, for immediate inspections when they would be more appropriate. That difference is entirely justified, for the reasons that I have explained. Having worked in business, I know that when you have routine inspections you want to make sure that the people who understand all the rules and how the systems work—and have all the necessary paperwork—are available, because otherwise you often end up with a second visit. That is what we are trying to avoid, because that costs both parties.
We have clarified where notice needs to be given by adding to the Bill reference to what a routine inspection is. To offer further reassurance—
In the Minister’s amendment, the only definition given is that it is not one of those things that are exempt. In which case, what value does “routine” add?
We felt that it helped to clarify that there was not a gap. In Committee, we went through a number of examples about which individual noble Lords were very concerned. Having checked through the examples, we are able to show to people’s satisfaction that the thing would be clear. Doing it this way in the Bill achieves that effect. However, I want to add a further reassurance. I am today committing the Government to reviewing the practical effect of the notice requirement within two years of commencement of this part of the Bill. I have listened to what has been said and we have made changes to try to clarify this. We want to have a good enforcement regime—
I thank the Minister and do not wish to detain the House, but does she not agree that a clear lack of definition within the Bill of “routine inspection” boosts the confidence of potential rogue traders, who will take that to court on a technicality?
I thank the noble Baroness for her intervention. We believe that the amendment put forward clearly defines the term “routine inspection” for the purpose of this power of entry. We clearly set out the exemptions in the Bill and I commend both our proposed amendments to try to clarify the circumstances, and the review within two years that I have offered, in response to the concerns that have been expressed about exactly how this will work. The powers and safeguards strike the right balance. It is an important area; the notice provision is strongly supported, particularly by the small business sector—not so much by big business—which we all care about because of the huge contribution that it makes to our economy. I ask the noble Baroness to withdraw her amendment.
I think the House knows that at the moment, no notice is needed in writing 48 hours before. The Government clearly made the wrong call, so they changed it a bit in the Commons by adding, “Well, unless the evidence is going to be lost”. They have now made more changes to say, “Well, routine inspections will be all right”; and now at the very last moment, we hear, “Well, there is going to be a review in two years’ time”. It sounds to me as if the Government know that this is wrong. The noble Lord, Lord Best, had it right: the Government should knock it out. They should not have put it there and it is not a way forward. There is no evidence that trading standards has misused its current powers; it will give notice because it is easier for it to do so. Ofsted does not have to define in law why it has made an emergency inspection without notice. The problem is the uncertainty: that if people are going to have to show that they had reasonable evidence or that they have fulfilled one of these requirements, there will be uncertainty, lack of clarity and fewer visits. I doubt that that is what the Government really want. I beg to test the opinion of the House.
24 November 2014
Division on Amendment 31
Amendment 31 disagreed.View Details
Amendments 32 to 40
32: Schedule 5, page 81, line 14, at beginning insert “In the case of a routine inspection,”
33: Schedule 5, page 81, line 14, leave out “that sub-paragraph” and insert “sub-paragraph (1)”
34: Schedule 5, page 81, line 24, at end insert—
“(5A) In this paragraph “routine inspection” means an exercise of the power in sub-paragraph (1) other than where—”
35: Schedule 5, page 81, line 25, leave out “of entry is to be” and insert “is”
36: Schedule 5, page 81, line 26, leave out “and the officer” and insert “who”
37: Schedule 5, page 81, line 29, leave out “this paragraph” and insert “sub-paragraph (3)”
38: Schedule 5, page 81, line 31, leave out “this paragraph” and insert “that sub-paragraph”
39: Schedule 5, page 81, line 38, leave out “a notice is not given, and the officer” and insert “an officer of an enforcer enters premises under sub-paragraph (1) otherwise in the course of a routine inspection, and”
40: Schedule 5, page 81, line 43, leave out from beginning to “finds” and insert “If an officer of an enforcer enters premises under sub-paragraph (1) and”
Amendments 32 to 40 agreed.
40A: After Clause 78, insert the following new Clause—
“Product description and advertisement
(1) Subject to subsection (2), where any specification, description or advertisement of goods, services or land or property offered for sale, hire or lease, or any instructions or maintenance manual relating to such goods or services includes one or more units of measurement, those units shall be—
(a) those set out in Schedule 1 of the Units of Measurement Regulations 1986 (S.I. 1986/1082) (as amended); or(b) any multiples or submultiples of those units as set out in Schedule 2 of those Regulations.(2) Subsection (1) shall not apply to products listed in Schedule (Product description and advertisement).
(3) Subject to subsection (4), supplementary indications may be used in addition to the units authorised in subsection (1).
(4) Where supplementary indications are used—
(a) in the case of a conflict between an indication of quantity expressed in an authorised unit and a supplementary indication, the authorised unit shall prevail; and(b) the authorised unit shall appear first, and any characters employed in the marking of quantity in relation to a supplementary indication shall be no larger and no more prominent than those employed in the marking of quantity expressed in the authorised unit.(5) In this section—
(a) an “authorised unit” means a unit of measurement specified in Schedule 1 of the Units of Measurement Regulations 1986 (as amended) or any multiples or submultiples of those units as set out in Schedule 2 of those Regulations,(b) a “supplementary indication” means one or more indications of quantity expressed in a unit of measurement, other than an authorised unit, which is used in conjunction with an indication of quantity expressed in an authorised unit,(c) “unit of measurement” does not include arbitrary sizes such as sizes of shoes or clothing, paper and stationery or eggs,(d) a “year” is not to be treated as a unit of measurement.”
My Lords, I start with an apology to the noble Lord, Lord Harris of Haringey. In Committee I said that I would certainly look at the idea of somewhat broadening the scope of what we were considering. However, I received the official reply very late, and I have also suffered, as I hope will not be too much in evidence as I move the amendment, from a chest infection, which means that I dissolve into coughing fits from time to time. Therefore, I was unable to pursue the matter further and I apologise to the noble Lord.
I moved this amendment in Committee because the present law—at least, as widely understood—causes confusion. In descriptions or advertisements, there is no need as in other transactions to quote metric as the primary measurement. I shall give two examples. Some estate agents describe properties in square feet, others in square metres. As carpets are normally sold in square metres, it is hard for a would-be customer to know whether a carpet will fit into a room in a flat or house which they want to buy if it is advertised in square feet. The other example that I gave in Committee was that a retailer may offer in his showroom two comparable fridges—one whose capacity is described in litres and the other in cubic feet.
It appeared that the present Government’s view is that descriptions and advertisements are covered by the Weights and Measures Act, but David Willetts, the previous Minister concerned, held the view that they were not. Trading standards officers responsible for enforcement of the law believe that the law does not apply. They have given me examples of where they understand certain terminology to be legal and where similar terminology is illegal. One described the law on this subject as “a ass”.
This morning I met the Minister. It was a heart-warming occasion. My noble friend the Minister and her officials were the soul of reason and agreed to advise the professions and trading standards officers that the law did require the primary description to be metric, with every right to quote imperial measures as well. Therefore, the position should now be clarified and I am most grateful to all of them.
I have one reservation, which I hope will give rise to some discussion before I announce what I will do with my amendments. I was told that the Government have no intention to make any further moves towards metrication. They are happy to let two separate systems—conflicting systems, in some ways—coexist, whatever the confusion and cost that may cause for ever and ever.
I mentioned in Committee that in 1970, as Financial Secretary when Roy Jenkins was Chancellor, I helped to prepare the change to decimalisation, which was subsequently carried out by the Heath Government in 1971. We sounded out no focus groups and commissioned no opinion polls. We thought that opinion might well be rather against the move and many people forecast chaos. However, the decimalisation board made the most careful preparations and explained everything very clearly. There was no chaos and everything went smoothly, and who now doubts in retrospect—except, no doubt, some irrational UKIPers—that the change made life simpler for consumers?
The then Prime Minister had set up the Metrication Board to do for metrication what was so successfully done for decimalisation, but Mrs Thatcher abolished the board. It nevertheless continued to be government policy in principle to move towards metrication, but slowly and very cautiously, at a snail’s pace. Even that has now been abandoned. Everyone else—except, as far as I know, Britain and the United States—has gone metric, including, for example, the Commonwealth.
The United States and Britain have paid for that. If you run two systems side by side, there will be mistakes, some of which will be very costly. There was the orbiter disaster in the United States. In Canada, the so-called Gimli Glider ran out of fuel because of the same mistake and nearly killed hundreds of people. In Britain, only in the past few weeks, we have heard about the difficulties of Network Rail. A BBC reporter was told about maintenance crews across Britain who record what they do in different ways. He said:
“Network Rail told me that in some parts of the country they use miles, in other parts they use kilometres, so when two teams record the fact that they’ve fixed ‘three units’ of line, some mean three miles, others mean three kilometres. I don’t need to spell out what a mess that makes”.
In Committee, I said I hoped that in my urging further steps towards metrification after Magna Carta we might record some progress. Magna Carta decided that there should be one measurement for weights throughout the country. I also said that I hoped that the Committee would not feel I was showing an excessive sense of urgency in asking for further progress when it had been a mere 800 years since the concept was first advanced.
As well as the cost to employers such as Network Rail and the possibility of serious disasters, YouGov recently polled a number of consumers and asked them if they understood the present system. It asked for quick answers to how many yards there are to a mile and how many metres to a kilometre. Most people found it difficult to answer those questions. It was easier for them to answer that there are 1,000 metres to a kilometre than to get the 1,760 yards right. These surveys did not show that there was any easy familiarity with either system. Of course, it would be much simpler for consumers if there was one system, and the metric system should be the only choice.
We have not exactly speeded up since Magna Carta. In fact, we have moved backwards. Clearly, Magna Carta’s commitment to one measurement was far too radical for the present Government. We have gone backwards instead of forward. I hope that there will be some protests at this progress at a snail’s pace and at what I would call the cowardice of the Government in going back on the Magna Carta decision. It should be tackled for the benefit of the consumer. For the fear of whom have the Government run away? Possibly, it is UKIP because it does not like that kind of thing as it is too common in Brussels.
My Lords, in Suffolk it took us a very long time to get used to getting rid of the word “coomb”, which used to be how we would weigh corn. The problem was that other counties had a different coomb so it was quite difficult to compare one with another. Gradually, we came to terms with the idea that you might have tonnes—which we have now more or less accepted. However, this House should be very careful about this amendment because we are less well qualified to talk about this matter than most. Young people do not have a problem: they have only one system of measurement. My young are in their 20s and 30s. If I say, “Oh, it’s about 22 yards away”, they have no idea what I am talking about. One reason why the Daily Telegraph has been losing readers is that it still uses only imperial measures, which limits one’s audience to a particular age. Given its views, that is probably quite suitable for that newspaper.
There is a simple way around this, and I want to ask the Minister to help me. It is perfectly reasonable for an aged gentleman doing his shopping to be able to ask for a pound of apples. I can see that if you have never asked for half a kilo, it is somewhat difficult. Equally, it is perfectly reasonable for shops at a local level to make that kind of arrangement. But we have had from my noble friend Lord Taverne an example of something quite different, and that is the railway industry. If that industry cannot use one system, and if we cannot organise people to use one system for measurements, what then? Of course we could go back to using imperial measurements, but it is more difficult to add up, multiply and divide using that system. I remember that there are 1,760 yards in a mile, but most people who are aged under 40 do not.
This seems to me to be one of the most footling battles I have ever heard of. It really is not sensible to say that our sovereignty is being impinged by a system that is easier for us all and which means that we can communicate with people. We would still have to talk to them even if we were not in the European Union—it would be very silly indeed to suggest that—so would it not be a good idea to use the same language? The people who want to carry on with imperial measures grow fewer and fewer as the days go by.
I would like us to take one tiny step—I hope that the Minister will be able to say something by way of encouragement—which is that in all areas that are not about the immediate local connection between a shopkeeper and a shopper, only one measurement shall be used. That should not be too difficult to achieve. The shoppers and shopkeepers will change as they die off. Indeed, I notice that in my local village shop there are people who ask for their goods in either one measurement or the other. That will change and it can happen as slowly as we want, but surely any normal business-to-business activity—all of us now know what the term B2B means—ought always to be carried out using metric measurements.
I end by saying that I am experienced in this because a friend of mine was the chairman of the Anti-Metrication Board, an organisation set up by those who felt that something deeply awful was happening to Britain. I know that my noble friend takes that view on most things. The board had a mystical view about the fact that you could not measure ley lines using the metric system. There are few in this House who wish to measure ley lines. I am happy if the Government decide that in future ley lines may be measured only using the imperial system, but could they please ensure that all normal, reasonable activities other than the very smallest ones can be done using one of the most remarkable inventions of all? It took the great step from Roman numerals to Arabic numerals one stage further and gave us a system that even I can use simply and surely. Please let us not go on fighting a battle against Napoleon.
My Lords, I start by thanking my noble friend Lord Taverne for his well considered speech and the thorough explanation of his amendments. UK weights and measures legislation works by focusing regulation on measurements and equipment that are in “use for trade”. This ensures that the primary focus is on those transactions where consumers need to know the quantity they are purchasing, how it compares to alternatives, and that they can rely on the quantity being accurate. The fundamental principle behind weights and measures policy is that every measurement used for the purpose of “use for trade” should be subject to the minimum level of regulation to ensure that businesses and consumers are protected against short measure and can have confidence in measurements.
Any transactions being made by reference to quantity or any statement of quantity made or implied in relation to a transaction is caught by the term “use for trade”. It applies widely and is intended to apply not just to the transaction itself but to any use,
“in connection with or with a view to”,
a use for trade—perhaps that is B2B. That would already cover most advertisements or product descriptions for goods. However, there are some cases, of which my noble friend highlighted several examples, where a product is not being sold on the basis of quantity and so the unit itself is not being used “in use for trade”. In these cases the usage would fall within the more general rules on what constitutes a legal unit as set out in the Units of Measurement Regulations.
This additional legislation, outside the Weights and Measures Act, makes it clear that metric units are the legal unit for any purposes beyond “use for trade”. Therefore, the use of a non-metric unit in the examples given by my noble friend are already not legal uses under the existing legislation. The Government are not aware of any significant demand from business or consumers to extend the scope of offences under the Weights and Measures Act to cover uses of units of measurement beyond “use for trade” or to extend what is caught by “use for trade”.
However, this morning I was glad to meet my noble friend and officials in order to talk through the issue. He raised an important point about how product descriptions and advertisements are being used in the marketplace, and the potential impact on consumer protection. We have tried to clarify the issue. The Government will commit to taking this forward with the relevant industry bodies to remind them of the current legal position and the importance of providing clarity for consumers. I hope that in due course we will not have a mixture of square metres and square feet when describing rooms so that we can purchase carpets more easily. As my noble friend stated, the Government do not believe that it is in the national interest for further metrication to take place against the wishes of the UK public. I fear that my noble friend’s bid for total metrification will have to wait a while—but I sincerely hope not 800 years.
While my noble friend has clearly targeted his amendments at units of measurement, I would be concerned at the risk of unintended consequences from making any extension to the scope of weights and measures law and the risk of causing confusion by duplicating existing legislation. The UK is already a metric nation, along with most of the rest of the world, as my noble friend said. The majority of UK businesses and the public sector switched to metric units almost 20 years ago. The vast majority of trade is now undertaken using metric units, and metric has been taught as the primary unit of measurement in UK schools ever since 1974. Over time, public support for metric units is increasing, and as we have heard, especially among young people. Businesses that are not providing metric units risk losing business as more and more people are using metric in everyday life. My noble friend Lord Deben asked why single units could not be required for other purposes. These uses are already regulated, and metric units are the legal measurements required under the Units of Measurement Regulations. However, imperial units can always be permitted as a supplementary indicator.
I hope that noble Lords are reassured that “use for trade” already applies widely and catches all transactions which are based on quantity. Even in those cases where “use for trade” does not apply, the legal units are already defined in law. Therefore, I ask my noble friend to withdraw the amendment.
My Lords, my Amendment 40B might possibly have unintended consequences and I was not going to move it. If the Government do in fact live up to their promise and ensure that the professions and those responsible for enforcement tell people exactly what the law is, which is that it requires that metric units should take priority even in advertisements and descriptions, that will meet my objections. I am very happy to withdraw the amendment.
Amendment 40A withdrawn.
Amendment 40B not moved.
41: After Clause 79, insert the following new Clause—
“Contravention of code regulating premium rate services
(1) In section 120(3) of the Communications Act 2003 (conditions under section 120 must require compliance with directions given in accordance with an approved code or with an order under section 122) before paragraph (a) insert—
“(za) the provisions of an approved code;”.(2) In section 121(5) of that Act (provision about enforcement that may be made by approved code) after paragraph (a) insert—
“(aa) provision that applies where there is or has been more than one contravention of the code or directions given in accordance with it by a person and which enables—according to whether the person imposing the penalty determines that a single penalty or separate penalties are appropriate and proportionate to those contraventions;”.(i) a single penalty (which does not exceed that maximum penalty) to be imposed on the person in respect of all of those contraventions, or(ii) separate penalties (each of which does not exceed that maximum penalty) to be imposed on the person in respect of each of those contraventions,according to whether the person imposing the penalty determines that a single penalty or separate penalties are appropriate and proportionate to those contraventions;”.(3) Section 123 of that Act (enforcement by OFCOM of conditions under section 120) is amended as follows.
(4) After subsection (1) insert—
“(1A) Subsection (1B) applies where a notification under section 94 as applied by this section relates to more than one contravention of—
(a) a code approved under section 121,(b) directions given in accordance with such a code, or (c) an order under section 122.(1B) Section 96(3) as applied by this section enables OFCOM to impose—
(a) a single penalty in respect of all of those contraventions, or(b) separate penalties in respect of each of those contraventions,according to whether OFCOM determine that a single penalty or separate penalties are appropriate and proportionate to those contraventions.”(5) In subsection (2) (maximum amount of penalty) for “the penalty” substitute “each penalty”.”
My Lords, when you donate to a charity using a five or six digit short text code, or call directory enquiries for a number you need or have forgotten, you are more than likely to be using premium rate services. These are added-value services, products or content that consumers can purchase by charging the cost to their phone bill or mobile pre-pay account. While these services can, and do, offer enjoyment, convenience and speed of access to users, they also demonstrate certain characteristics which have the potential to give rise to harm, in the absence of effective regulation. For this reason, it is equally important that companies comply with the rules set out by the regulator’s code of practice, which serves to ensure consumers are treated fairly and not misled or taken advantage of.
PhonepayPlus regulates the market for premium rate services, and its code of practice, having been approved by Ofcom, sets out the regulatory framework for the industry, outlining the rules and required standards for every company involved in providing premium rate services to UK consumers. For example, a person or company providing premium rate services must be up front about the services they offer, and how much they cost, before users make any purchases. They must also treat consumers fairly and resolve complaints quickly.
Under the Communications Act 2003, PhonepayPlus can impose a penalty in respect of breaches of the code. The regulator has interpreted this to mean that it can impose £250,000 in respect of each provision of the code that is breached. The proposed amendment is intended to make it absolutely clear that where it is appropriate and proportionate, the maximum fine available to the regulator is indeed for each provision of the code that has been breached. Therefore, in the event of a company making two serious contraventions of the code, the regulator could impose a fine of up to £500,000, if that is deemed appropriate and proportionate.
This clarification will impact only on the premium rate service companies whose contravention of the rules is serious. It will not impact on the majority of businesses, which are compliant. The clarification is important to the regulator so that effective sanctions continue to be available for the most serious breaches of the code, which is there to ensure that consumers are not harmed by premium rate services and can use them safely and confidently. By clarifying the regulator’s fining powers, the amendment is an important tool in ensuring the continued existence of a sufficient deterrent to non-compliant behaviour by companies or people providing premium rate services. I beg to move.
Amendment 41 agreed.
Amendment 41A not moved.
41B: After Clause 80, insert the following new Clause—
“Nomination of judges to the Competition Appeal Tribunal
(1) The Enterprise Act 2002 is amended as follows.
(2) In section 12(2)(b) (competition appeal tribunal) after “the Lord Chancellor” insert “or nominated by the appropriate senior judge pursuant to paragraph 2(4) of Schedule 2”.
(3) After section 12(5) insert—
“(6) Appropriate senior judge has the same meaning as in paragraph 2(7) of Schedule 2.”.
(4) In Schedule 2 (the competition appeal tribunal) after paragraph 1(3) insert—
“(4) Upon the nomination of the appropriate senior judge, any judge of the High Court of England and Wales, the Court of Session or the High Court of Northern Ireland shall be a member of the panel of chairmen and shall hold and vacate office in accordance with the terms of their nomination.”.
(5) In paragraph 2(1) of that Schedule after “The members appointed” insert “by the Lord Chancellor”.
(6) In paragraph 2(2) after “A person” insert “appointed by the Lord Chancellor to the panel of chairmen”.
(7) In paragraph 2(3) after “and the chairmen” insert “appointed by the Lord Chancellor”.
(8) In paragraph 2(4) after “remove a person” insert “appointed by him”.
(9) In paragraph 2(6) after “remove a person” insert “appointed by him”.
(10) In paragraph 2(7)(a) after “the person to be” insert “nominated or”.
(11) In paragraph 2(7)(b) after “the person to be” insert “nominated or”.”
My Lords, the amendment raises a short but important point about the appointment of judges to sit on the Competition Appeal Tribunal. It has the support of the Lord Chief Justice of England and Wales, who brought the matter to my attention.
Clause 80 and Schedule 8 to the Bill make significant changes to the jurisdiction of the Competition Appeal Tribunal, which was established by the Enterprise Act 2002. At present, the tribunal hears appeals from the competition authorities and regulators. The effect of Schedule 8 will be to expand its jurisdiction so that it will become, in effect, a specialist court hearing private competition appeals from all parts of the United Kingdom. I understand that that part of the Government’s proposal has received widespread support. It cannot be disputed that, if it is to cope effectively with this increased case load, the tribunal will require to be staffed by a sufficient number of judges from all parts of the United Kingdom who are equipped to deal with it.
The position, at present, is rather unusual. The judges of the Chancery Division in England and Wales are, on and by virtue of their appointment, authorised to sit as chairmen of this tribunal. However, under the current legislation, their appointment terminates after eight years and is not renewable. This is found in paragraph 2 of Schedule 2 to the Enterprise Act. This is not the best use of that resource. The effect of the eight-year terminus is that their expertise is then lost, although they may continue to serve as judges in the Chancery Division for many years later.
The fact that the system of appointment that I have described applies only to the Chancery Division has another unfortunate consequence, which is that other sources of expertise among the judges are not being used. Practitioners with experience of competition law are appointed to the Queen’s Bench Division but are not automatically authorised to sit on the tribunal. The effect of this is that, to be able to sit as a chairman, they would need to apply to the Judicial Appointments Commission, enter and be successful in a competition. For obvious reasons, serving judges are not keen to undergo that process and I understand that, in practice, they do not do so. Moreover, no Scottish or Northern Irish judges can currently be appointed to the tribunal either, without successfully completing an equivalent recruitment process in their respective jurisdictions, which, for the same reasons, has no attraction for them either. The absence of judges from those jurisdictions is all the more unfortunate as, under the changes being introduced by the Bill, the tribunal, with its widened jurisdiction, can be expected to hear more cases from Scotland and Northern Ireland than it does at present. One has to bear in mind that there is a process of appeal. Appeals from tribunals sitting in Scotland and Northern Ireland will go to the Court of Session and the Court of Appeal respectively. The absence, on the tribunal, of judges from those jurisdictions is bound to be noticed and this could raise sensitive issues which are best avoided.
The problem that I have briefly outlined was recognised in the Government’s consultation paper Streamlining Regulatory and Competition Appeals. In paragraph 5.13, it is noted that,
“the practice of requiring judicial officeholders to undertake a second appointment … for an equivalent office acts as a bureaucratic barrier to enabling any of these judges to sit in the CAT”.
Legislation was therefore proposed that would enable the heads of the respective UK jurisdictions to select and appoint judges whom they regarded as appropriate to sit as chairmen. Those would be judges of all divisions in the High Court in England and Wales, irrespective of the division to which they were appointed, and judges sitting in the Court of Session in Scotland and in Northern Ireland. They would be able to continue sitting as chairman without any eight-year limitation, which is the position under the Act at present.
The amendment has been proposed because, as presently framed, the Bill does not give effect to the proposal outlined in that consultation paper. If the Bill remains as it is, the bureaucratic barrier will remain in place. That is a matter of great concern to the Lord Chief Justice as head of the judiciary in England and Wales. In his view, with his knowledge of the resources that would otherwise be available to him, it is depriving the tribunal of some of the ablest judges to serve that jurisdiction. It is to be expected that the same sentiments will be felt in Scotland. I know, from recent discussions with people there, that they have had to appoint a leading member of the Bar because no judge is prepared to undergo the process and sit on the tribunal.
I need not go through the provisions, which are set out quite clearly in Amendment 41B. The essence, the key provision, is in subsection (4), which provides:
“Upon the nomination of the appropriate senior judge”—
that is, the senior judge in each jurisdiction—
“any judge of the High Court of England and Wales, the Court of Session or the High Court of Northern Ireland shall be a member of the panel of chairmen and shall hold and vacate office in accordance with the terms of their nomination”.
Of course, that process relies on the judgment of the senior judges, but they know their judges very well and are well able to judge those who are appropriate to sit on the tribunal and can be relied on to make the appropriate choices.
Finally, I draw the Minister’s attention to a slip in the amendment. It is a very small misprint, in subsection (2). The reference there to paragraph 2(4) of Schedule 2 should be to paragraph 1(4) of that schedule. That is the paragraph that is set out in subsection (4), from which I have just been quoting.
For those short reasons, I beg to move.
My Lords, Amendment 41CA is in the same group as the amendment moved by my noble and learned friend Lord Hope of Craighead. It should be understood that I agree with everything that my noble and learned friend has said in support of his amendment. The amendment in my name is a much shorter form of that. It sets out an addition to Schedule 2 to the Enterprise Act 2002:
“A judge of the High Court of England and Wales, the Court of Session or the High Court of Northern Ireland shall be eligible for appointment as a chairman if nominated by the Lord Chief Justice of England and Wales, the Lord President of the Court of Session and the Lord Chief Justice of Northern Ireland respectively”—
who are all the senior judges in their respective jurisdictions.
I do not think that the House would be assisted by my going over the detail of the submission made by my noble and learned friend Lord Hope of Craighead. The main point that I wish to stress is that, when one looks at the consultation document, to which reference has been made, it would appear that the purposes that the Government have in mind for their intended legislation are precisely the purposes that would be served by Amendment 41B, if it were accepted, and likewise my own Amendment 41CA, if the same thing happened to it.
It is instructive to bear in mind, therefore, that in paragraphs 5.14 and 5.15 of the consultation document, the Government explicitly say that they are “minded to legislate”: first, to deal with the appointment problem encountered in Scotland; and, secondly, to deal with the fact that those who achieve appointment as chairmen of the Competition Appeal Tribunal can serve for only eight years.
In conclusion, if the Minister is of the view that the government policy has changed, it would be instructive to the judges, both north and south of the border, if that change in policy was made quite clear. If there is some concern about the precise drafting of either my amendment or that moved by my noble and learned friend, it could be easily corrected in time for Third Reading.
My Lords, I was not sufficiently fast on my feet, but when he comes to reply to this debate, perhaps the noble and learned Lord, Lord Hope of Craighead, could make it clear whether the delicate implication of his amendment is that the Competition Appeal Tribunal is judicially underpowered for its tasks at present or, in particular, in the future.
My Lords, I will reply to that very briefly. I thought that I made it clear that the amendment is really provoked by the expanding jurisdiction in Schedule 8. The present position copes satisfactorily—it is not the ideal situation—but the expanded jurisdiction will greatly increase the workload of the tribunal and its visibility, because it is going to deal with private litigation as well as the regulatory authorities. It is that particular feature that is concerning the Lord Chief Justice and, I dare say, his equivalents north of the border and in Northern Ireland. I do not want to criticise anybody on the tribunal at the present time; I am trying to look forward to the expanded jurisdiction and see that it is served as well as possible.
My Lords, I am grateful to the distinguished noble and learned Lords, Lord Hope of Craighead and Lord Mackay of Drumadoon, for joining our debate and for their amendments, which are intended to address an anomaly in the appointment of Competition Appeal Tribunal chairs. I recognise their concerns and agree that this difference has existed for far too long.
As noble Lords will know, the CAT has a UK-wide jurisdiction and, as a result of the Bill, we expect the CAT to become the venue of choice for competition cases. As the noble and learned Lord explained, it will be busier. The CAT hears appeals against decisions by the regulators and competition authorities in cases arising in England and Wales, Scotland and Northern Ireland. I agree with the noble and learned Lord that the current process for appointing CAT chairs effectively acts as a barrier to judges sitting in the Court of Session in Scotland or the Northern Ireland High Court.
The Judicial Appointments Commission was created in order to remove the scope for any perceived political interference. As part of its responsibilities, judges who are appointed to the Chancery Division of the High Court are also assessed for appointment as a chair of the CAT. However, the Scottish and Northern Irish equivalents of the Judicial Appointments Commission do not have a remit to make recommendations for appointments of CAT chairmen. This means that the only way judges in either the Court of Session or the Northern Ireland High Court can sit as chairmen in the CAT is to seek appointment via an application to the JAC.
I agree with the noble and learned Lords that this cannot be right, nor can it be what was intended when the Judicial Appointments Commission was created. It seems needlessly bureaucratic, as the noble and learned Lord, Lord Hope, said. This is an issue on which we share common ground and I would welcome the opportunity to discuss it in more detail with the noble and learned Lords to see what progress we can make at Third Reading, including, if appropriate, tidying up any slip. I hope that what I have said reassures the noble and learned Lords and I therefore ask the noble and learned Lord, Lord Hope, to withdraw his amendment.
My Lords, I am extremely grateful to the Minister for her encouraging and constructive reply. I am quite sure that in discussion we will be able to find some satisfactory solution. There are two solutions on the table and I think that, with the assistance of the Bill team, we can probably work out a satisfactory answer. I look forward very much to achieving that before Third Reading. For the time being, I beg leave to withdraw the amendment.
Amendment 41B withdrawn.
41C: After Clause 80, insert the following new Clause—
“Review of operation of Schedule 8
(1) The Secretary of State must, before the end of the period of five years beginning with the day on which this Act is passed, appoint a person to review generally the operation of Schedule 8 to this Act.
(2) The review must address, in particular, the following matters—
(a) the number and outcome of cases brought under the Schedule,(b) the amount paid as a result of these cases to consumers, professional advisers and third party funders, and(c) the extent to which consumers overall have benefitted from the operation of the Schedule.(3) After the person appointed under subsection (1) has completed his review, he must compile a report of his conclusions.
(4) The Secretary of State must lay before Parliament a copy of the report made under subsection (3).”
My Lords, Amendment 41C also seeks to insert a new clause after Clause 80, but does so with a rather different objective from that of the noble and learned Lords who have just spoken.
The proposed new clause is titled, “Review of operation of Schedule 8”, which is fairly self-explanatory. Before going any further, I must take this opportunity to thank my noble friend Lady Noakes for having moved amendments on my behalf to this part of the Bill. I tabled them some months ago for discussion in Committee but unfortunately malign fate intervened to ensure that I was abroad on the day that they came to be discussed.
Reading the record of the Committee’s deliberations, there were a number of questions still in my mind. As a result, I tabled the amendment we are debating tonight. I also thank my noble friend Lord Eccles for having joined me in taking up the cudgels. He has his own characteristically insightful amendments, which we will come to in a moment and to which I have put my name. Finally, I thank the Minister and her officials for the courtesy and kindness in meetings that they have afforded both my noble friend and me. With those thanks, to horse.
It is easy to characterise amendments to Clause 8 as anti-consumer. Indeed, reading the remarks of the noble Baroness, Lady Hayter, in Committee, I felt that that was somewhat her default option. However, for me and my noble friend Lord Eccles, the reason for tabling the amendments is not—I repeat, not—anti-consumer; rather they aim to improve the chances that consumers will receive the compensation justly due to them, and it will not flow in large measure to third-party funders, professional advisers and the like.
I was grateful to the Minister for the meeting at which my noble friend Lord Eccles and I explained this, and attempted to explain how the Competition Appeal Tribunal—the CAT—would, in our view, find itself in the front line of legal wrangling of a type and range which, by reason of its past experience, it was ill fitted to handle. I confess that I returned from that meeting with my noble friend somewhat depressed at the outcome. I returned to my office to reflect on what could be said that would cause my noble friend and the noble Baroness, Lady Hayter of Kentish Town, better to understand the potential ramifications of the Pandora’s box they are so casually preparing to open.
While awaiting inspiration to strike, I leafed through the Financial Times—and there it was, on page 8. It is a full page advertisement in very large type:
“We won over $28 billion in judgments and settlements in the past two years”.
“650+ lawyers worldwide—all devoted exclusively to litigation, arbitration and white collar matters. Get us on your side”.
Equally characteristically, in very small type down the bottom, which one does not read so easily:
“Attorney advertising. Prior results do not guarantee a similar outcome”.
That is the sort of 500-pound legal gorilla that the CAT is going to have to deal with. One does not win $28 billion-worth of damages by saying, “After you, please, Claude. After you, please, George”. Your weapon of choice will be the legal equivalent of a knee in the groin.
Lest any noble Lords think I struck lucky, I refer the House to an article the next day in the Times. These cases will undoubtedly require, find and use expert witnesses. The article states:
“A High Court judge last week called for a cap on legal fees … Mr Justice Mostyn said that the fees in a case in which lawyers and experts were paid a total of £920,000 during a dispute over assets worth £2.9 million was “madness”. A key factor was the use of experts: six reports by forensic accountants were filed, as well as a joint expert statement at a cost of £154,000. In eight months since April, a ‘staggering’—
that was the judge’s word—
“further £700,000 was spent”.
These are the sorts of things that lie ahead for the Competition Appeal Tribunal. That is my thinking in wishing to see the Government implement the amendments we are discussing, to ensure that the 500- pound legal gorillas do not run off with all the money.
Having said that, I accept that there has to be a little worm of doubt in my apple of certainty. Maybe my fears are wrong: just suppose, despite all my concerns, the new system works well and delivers the right outcomes for consumers. I am not able to foretell. Equally, I hope my noble friend on the Front Bench will accept that she, too, has to have a little worm of doubt in her apple of certainty. I hope the noble Baroness, Lady Hayter of Kentish Town, who I know to be an individual of discernment and sound judgment, can accept that she, too, cannot be certain. Only the passage of time, with its attendant experiences, can answer this question.
That is why I have tabled the amendment—so we can see what really happened in real life and not in our potentially fevered imaginations tonight. My amendment requires the Secretary of State, before the end of five years, to appoint a reviewer of the operations of Schedule 8. The reviewer can roam widely but he must answer three key questions. The first is a description of the cases brought under the schedule and the outcomes to them, so that we can form an overall strategic view of how the schedule has worked.
Secondly and most importantly, he has to split the proceeds paid between consumers, professional advisers and third-party funders. This will enable us to see the level of benefit to consumers. If, for example, consumers receive 90% of the total, it would be one thing. If, as I fear, they receive less than 50%, it will be another. Finally, a report on the general operation of the schedule, and how it benefits consumers, would open the way for some recalibration of legislation in the light of experience.
As this piece of legislation has such potentially huge implications as we move from an opt-in regime with, to date, only one body authorised to bring proceedings—Which?—to an opt-out regime where anybody is free to have a go, there is a need for a degree of formality. My amendment requires the Secretary of State to lay a report before Parliament, which will ensure the appropriate level of debate, scrutiny and follow-up.
To conclude, this is an amendment by which nobody loses. The only winners are truth and accuracy. I fear that my noble friend will be told to resist. There will be the usual guff about creating precedents. I argue that this change in our law is unprecedented and that the potential implications deserve a serious, formal, forensic follow-up and analysis. My noble friend will no doubt be told that her department will carry out a thorough review of the outcomes. Quite possibly. However, a review by an outsider, poking his or her nose disobligingly into various corners, is likely to be far more effective. We would also avoid the risk, if the results of the review are unwelcome and disobliging, that the press release, if any, may by some strange alchemy appear at 4.30 on a Friday afternoon.
I do not suggest that my amendment meets the exacting standards for parliamentary draftsmen. All I am asking my noble friend to do today is to accept that there has to be some uncertainty in all our arguments—mine and hers—and that she will, in consequence, take the amendment away for one final look before Third Reading. I conclude by saying to my noble friend, to paraphrase the famous phrase, that if she has nothing to hide, she has nothing to fear from my amendment. I beg to move.
My Lords, I put my name to the amendment and I will make a brief addition to what my noble friend said. This is a very significant change to the law. It is quite complicated, moving from the present arrangements of opt in to the double arrangement of opt in and opt out, going beyond, interestingly, what the European Union advises, and perhaps not concentrating enough on alternative dispute resolution techniques. Having said all the way through that the one thing we do not want is a US-style lawyers’ charter—we are all agreed on that—unfortunately the Bill is drawn so widely that we run a real risk that that is what we will get.
We need to remember that we are in the Anglo-Saxon camp and have a tendency to do things in a similar way to the way they are done in the United States—in the creative arts or wherever, and including, I fear, the law. We also need to remember that where such arrangements have been made in other jurisdictions, they have not been free of problems. Australia, which is often cited, has had considerable trouble about the authorisation of those who are to conduct the class actions or collective proceedings. It has been described as skirmishing. The way the Bill is drawn, we will have very similar problems with the question of who is to be authorised and who is not—because the person who is not may not be very happy.
New subsection (8)(b) states that a representative can be appointed,
“only if the Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings”.
I will return to that on the next group, but it is very widely drawn. In support of my worry about the very wide drafting, there was a long and relatively confused debate in the other place in the Bill Committee. The answer, both there and here, seems to be, “Well, the Competition Appeal Tribunal will sort it all out”. I think that that puts too much of a burden on the tribunal and is unlikely to work well.
My Lords, I am delighted to see my noble friend Lord Hodgson back with us. We missed him on the day when the amendments were finally reached, but my noble friend Lady Noakes introduced his amendments with great clarity and verve. We had a good debate and we now have several different amendments, some of which we will be discussing in a minute. I am grateful for the efforts that my noble friends Lord Hodgson and Lord Eccles have made to explain their thinking to me in person. We have tried hard to meet their concerns. Having talked to my colleagues in the Government, I am now able to respond positively.
Although this amendment would require a review of the schedule, I believe that its driving force is to examine the effect of opt-out collective actions. I should say that the Government are happy with our proposals and believe that the existing opt-in regime is prohibitive, with only one collective case in 10 years involving 130 claimants. Therefore, the changes in the Bill are important. I do not share the pessimistic view about US-style claims, mainly because of the safeguards that we have written into the Bill, which we will no doubt come on to on the next amendment. However, I wanted to say that we have had a very good discussion, we have listened and we are happy to agree to a review after five years which covers the ground set out in the amendment. Following a further discussion that I had with my noble friend this morning, we will also commit to a ministerial Statement on the review here in Parliament. I am afraid that we cannot put the review in the Bill, as that would have ramifications for other possible reviews elsewhere in the Bill, but I can commit to a review, and I know that the Confederation of British Industry, which I met on Thursday because of its concerns about this part of the Bill, is content with that.
Of course, Schedule 8 does not just introduce an opt-out collective actions regime. It reforms the entire private actions regime for the benefit of both businesses and consumers. I think we are all agreed that consumers come first here. Therefore, the Government believe that it would be appropriate for the review of the impact of Schedule 8 to examine the whole range of reforms. The review would take into account both opt-in and opt-out collective actions, the fast track regime, the number of cases under the CMA redress power, collective settlement cases and, of course, the provisions outlined by my noble friend in his amendment. In those circumstances, I hope that my noble friend will feel able to withdraw his amendment.
My Lords, I am extremely grateful to my noble friend for her response. Of course I would like the provision in the Bill, because that gives it real permanence, but I spot two-thirds, three-quarters or, perhaps, only 5% of a loaf, and I will certainly grab it. In the circumstances, I beg leave to withdraw my amendment.
Amendment 41C withdrawn.
Amendment 41CA not moved.
Schedule 8: Private actions in competition law
41D: Schedule 8, page 113, line 3, at end insert—
“( ) when it considers that the proposed collective proceedings are justiciable and have merit, ( ) when it considers that early settlement will not be achieved either by alternative dispute resolution or any other means of resolving the dispute.”
The purpose of this group of amendments is to try to ensure that we begin as we mean to go on. It has been said right from the beginning that the focus of the regime is on the public, consumers, traders and small businesses that are given a bad time in the marketplace. I think we all agree that they are the people who should be enabled to settle their claims and not to make the fact that the claims can be settled into a charter for legal advisers, third-party funders and ad hoc organisations collected together. That has been the Government’s position right from the start.
Of course, the fact that we focus on the people who are in the best position to put the claim because they have suffered the damage does not mean that the legal profession will not be involved. No one would dream of accepting any form of settlement in this field without taking good legal advice. That would apply to defendants as well. Nevertheless, the endeavour should be, as my noble friend said, that the benefit does not go to what you might call the legal outriders: claims managers, hedge funds and so on.
The question I asked myself on this group of amendments was how to achieve more certainty that we will maintain the focus on consumers. That seems to me to be a matter of the balance between the statute and the tribunal rules. Those are the two places in which the rules of the game will be settled. To get the balance right, I think we must ensure that some things which are not at the moment mandatory under the Bill become things which must happen rather than things which may happen.
That is the reason for Amendments 41D and 41F. Three matters are added by those amendments to what will be subsection (5): two at the beginning and one at the end. The first to be added at the beginning is for the competition authority to make sure that,
“it considers that the proposed collective proceedings are justiciable and have merit”.
There is much evidence of vexatious claims being made in other jurisdictions. If those claims are speculative or even worse—I think there is evidence of this in some provinces in Canada whose systems have been cited—they become blackmail claims. The argument is put that it would be less expensive to settle and pay over some money than to fight through a collective action.
The second addition that Amendment 41D seeks to insert is that the tribunal may make a relevant order only,
“when it considers that early settlement will not be achieved either by alternative dispute resolution or any other means of resolving the dispute”.
There is, of course, a concentration on alternative dispute resolution, and that comes also from Europe. I think we would all want to feel that the tribunal had a statutory duty to find out not just whether or not such a system is available, which is the way the measure is drafted in its rules at present, but to satisfy itself that these matters had been considered and that if there was a faster and cheaper way of coming to a resolution which was in the interests of all the parties, it would be followed. As we know, sometimes irrationality creeps into disputes, when a rational approach tells you that it would be better to settle.
Thirdly, another of my proposed amendments seeks to deal with the fact that my noble friend on the Front Bench said in Grand Committee that the Government did not want to restrict the flexibility of the Competition Appeal Tribunal. I quite accept that. Therefore, I have included in Amendment 41F the catch-all provision:
“Nothing in subsection (5) prevents the Competition Appeal Tribunal from taking into account any other matter which it considers to be relevant”,
so that it is not constrained.
I have tabled two small amendments because I was concerned with the thought that the Bill as drafted seemed to imply that only one person would apply for authorisation. It seems to me likely that if there is a fairly big issue and the Bill is very open regarding who may apply for authorisation, two or three people may apply. Therefore, Amendments 41E and 41G seek to replace “the” with “a” at lines 4 and 14 of page 113. I am told that that drafting is defective but I would like to understand the Government’s position on this point. If more than one person seeks authorisation, how do the Government see that situation being dealt with? Presumably, some form of appeal procedure will need to be made available to those who are not chosen. I do not think the Bill covers that issue. I refer back to my short description of a Bill Committee debate in the other place where that point was raised. As far as I can see, it was never settled, and is not settled in the Bill as drafted.
Amendment 41H seeks to define and limit who can bring a claim. It seems to me that it has been Which?, and now we are going to an open field. Would it not be much more sensible to make a move which greatly expands the number of people who can make a claim and, of course, expands the type of claim they can make from that of opt in only to opt in and opt out, and not to have the possibility of a very wide range of people applying for authorisation? Indeed, if we are to keep the focus on the public, traders and businesses, we want to make sure that those affected are represented by people who collectively have their interests at heart and know a bit about the detail of the business that they are in as well. Therefore, Amendment 41H seeks to leave out “a person”, which is the general description at the moment, and insert,
“any appropriate consumer representative body or trade association”.
I am bound to say this seems to me to be completely in line with what the Government have said throughout.
At Second Reading, the Secretary of State said that this provision is not for lawyers but for the people who are directly affected. In responding to consultation, the Government said that lawyers, third-party funders and special purpose vehicles would be ruled out. However, the Explanatory Notes to the Bill contain the phrase that I have used. Therefore, in turning the proposition from the negative—that it is not to be this kind of person—to the positive—it is to be that kind of person— I believe that I am acting in accordance with the Government’s written and expressed policy in inviting the Government to do what they have already said they intend to do.
I turn to the amendments to new Section 47B(8)(b). It is important that I read into the record that new Section 47B(8)(b) says,
“only if the Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings”.
That is a very subjective test. The phrase “just and reasonable” is more normally represented as “fair, just and reasonable”. The latter phrase is very frequently used in proceedings to judge the behaviour of people in the past. It comes into negligence actions very frequently and is used to judge the past. I have asked whether there are precedents for it being used to judge the future. At present, no precedent has been produced. I believe that it will not be at all easy for the Competition Appeal Tribunal to look at a prospective authorised person and say, “Oh goodness, yes, I can see as a matter of judgment that this person is going to be just and reasonable”. We have to remember that there is no previous track record because this is a new procedure including the opt out, which has not been the case previously. Therefore, Amendment 41J proposes to substitute for the relevant wording the phrase,
“the person has the experience and standing appropriate to the size, type and extent of the claims to be made”.
Amendment 41K seeks to,
“leave out ‘just and reasonable’ and insert ‘just, reasonable and in the primary interests of the class members’”.
In the first case, what we are looking at is references that the party can bring. What have they done in the past? Who are they? Do they have the knowledge and the skills which would make them good leaders of a collective action? In the second case, we are looking at their motivation. Do they really want to work in the interests of the class members or not?
I apologise for speaking at length. In summary, a scheme is involved in these eight amendments. They are designed to shift the balance to give more statutory backing to the operations of the Competition Appeal Tribunal as it writes its rules and to enable the regime to develop against the background of a scheme which has been decided by Parliament and not one which is left entirely to the tribunal. I beg to move.
My Lords, I declare my interest as a partner for the last 45 years in the global commercial law firm, DAC Beachcroft. I wish to speak particularly to Amendments 41H, 41J and 41K. In doing so, I support my noble friend in urging caution when examining Schedule 8 to the Bill.
This is a complex area of law and procedure and I would be the first to say that I do not understand it all, but I think that the overview is this. We are now dealing in this group of amendments with situations where, first, one or more businesses have been found to be in breach of competition law; secondly, numerous consumers have been affected as a result; thirdly, the individual amounts by which each consumer is affected are small; fourthly, a collective mechanism is therefore needed; but, fifthly, getting all affected consumers to opt in to join a legal case has not worked to date. Against that background, I can well understand why the Minister has promoted the concept of opt-out, whereby a representative person can take action on behalf of all those affected unless they positively object to being included and so choose to opt out.
My caution is this: that is a wholly new concept in the United Kingdom, so I argue that we must be cautious. We must balance the rights of the consumer with the rights of each individual business, particularly small and medium-sized enterprises, accepting of course that we are dealing with situations where business has been in breach of its market obligations. My noble friend has outlined proposals that examine carefully some areas of the detailed mechanics in this schedule and I support their overall approach, which seems to me to be one of proportionality. I recall, when I was speaking from the Benches opposite on the Compensation Bill, that I urged similar caution when we were looking at the regulation of claims management companies in 2005. I venture to say that if we had been a little more cautious, perhaps we would not have been quite so inundated with nuisance calls and texts about payment protection insurance, where a similar balance has had to be struck.
So how do we promote the interests of the consumer in a proportionate way? I agree that we need to achieve greater control over the identity of the representative person who decides to launch down this compensation trail on behalf of others. To me, the proposal that we limit this to trade bodies has considerable force but, if that is felt to be too limiting, we should lay a clear marker that the guiding principle to be applied in appointing a representative person is that it is in the interest of the consumers, the so-called class members, to do so. I support Amendments 41H and 41K in particular but also applaud the thinking behind the amendments generally.
My Lords, I thank my noble friend Lord Eccles for his perceptive analysis, and for the discussions that we have had where we have found much common ground. I am also most grateful to my noble friend Lord Hunt of Wirral for intervening to urge caution from an admirably common-sense point of view.
I shall address each of the amendments in turn, particularly their possibly perverse effects. Amendment 41D would require us to place in the Bill scrutiny of the strength of a claim and the consideration of alternative dispute resolution. I agree that weak claims should not be brought and that parties should attempt to reach a settlement. Rule 7 of the draft Competition Appeal Tribunal rules provides for this, requiring the CAT to consider the strength of the claims and the availability of alternative dispute resolution.
It is appropriate for these requirements to be in the CAT rules so that they can be more easily modified and strengthened if need be. This ensures an effective regime that promotes the interests of consumers. Although the CAT rules have been made available in the House Library, they will be the subject of formal consultation in the new year, well ahead of commencement. I undertake that the points on both the scrutiny of the strength of the claim and the availability of alternative dispute resolution will be included in the consultation document. To clarify, the CAT rules are made via secondary legislation. They are the responsibility of BIS Ministers and produced by the Government. This means they are binding on the CAT, cannot be ignored and cannot be changed by the CAT. They are the right place for most of the concerns that we have outlined today.
The micro-amendments, Amendments 41E and 41G, would limit a collective action to one representative. I understand why my noble friend would like to prevent multiple representatives bringing claims, as that could lead to businesses facing uncertainty and larger claims for damages. However, these mini-amendments would also have unintended consequences, as he hinted, because they would prevent hybrid claims. These are claims where more than one group of claimants—for example, consumers and small businesses—join together to bring a case. For instance, in a claim for damages following a cartel in rail fares, both consumers and SMEs may wish to make a claim. During the private actions consultation in 2012, however, business groups said that the one thing they wanted was finality and closure. They want to be able to pay out one set of damages and know that it is binding on those within that action.
To prevent a business having to respond to multiple representatives, there is discretion for one representative to be the lead representative. I am happy to discuss this further with my noble friend Lord Eccles in the context of the consultation if that would be helpful. Ruling out hybrid cases, as these mini-amendments would, means that businesses might face an opt-out collective action as well as multiple follow-on actions. There would be an incentive for claimants to race each other to court to commence a claim before anyone else, even if that claim was then dropped. This type of behaviour could lead to just the kind of litigation and cost that we all want to avoid.
Amendment 41F would provide the CAT with discretion to take into account any other matters that it considered relevant when authorising the representative. The Bill already provides the CAT with a great deal of discretion, and the CAT rules will include other factors that the CAT must take into account. This is likely to include any other factors that the CAT considers relevant.
Amendment 41H would exclude SMEs from bringing forward collective actions that would reduce their access to redress. We have deliberately avoided a prescriptive list of eligible bodies and instead afforded the CAT discretion, in accordance with the CAT rules, to determine whether a body is suitable. The CAT is a specialist competition court with a strong track record in dealing with consumer detriment. The Government believe that the CAT is best placed to scrutinise every body that seeks to act as a representative.
The CAT includes High Court judges—and may include some more if we make progress on the other amendment—who are experienced in making decisions based on broad criteria. It is appropriate that they use their experience to scrutinise each case on its merits. However, we would welcome contributions to our consultation on the collective action provisions of the CAT rules to help to ensure that only suitable bodies may bring collective actions.
Amendment 41J would require that the CAT may authorise a person to act as a representative only if they had appropriate experience and standing. The Government believe that this could be problematic. Given the lack of collective action cases brought forward in the past 10 years, it would be extremely difficult for the CAT to find a representative who would satisfy these claims. It is the Government’s intention to ensure that only appropriate representatives can bring forward cases, with discretion given to the CAT to achieve just that. Again, I will undertake to ensure that this concern is covered in the consultation.
Amendment 41K would require that the CAT believes the representative will act in the best interests of the class members. I agree with the sentiment of the amendment. Indeed, the rationale behind wanting only consumer organisations and trade bodies to bring collective actions is that they will represent the claimants’ best interests. To this end, we have introduced a similar test in the CAT rules. I am reluctant to place such a requirement in the Bill as it may deter those cases that have a mixture of consumers and SMEs. This is because the CAT might be forced to decide that a consumer organisation cannot represent a business or that a trade body cannot represent consumers. In turn, this would lead to business having to respond to multiple representatives, and possibly claims, which, as we have already, said we are keen to avoid.
I have discussed these amendments with noble Lords and set out some further considerations this evening. I hope that I have provided some useful reassurances about the consultation process. I hope that my noble friend will withdraw his amendment.
My Lords, I am very grateful to the Minister for having met some of the underlying issues in her answer. Possibly the most immediate is that I wanted to change the word “the” into the word “a” twice. My noble friend’s answer showed just how complex that was. She went into a great list of things that could happen if you did not have “the” and suddenly found you had only “a”. I fully accept that. This is a very complex situation. My worry is that I do not believe that it has been carefully thought through.
Now we are dependent on the consultation. The questions that arise are: who will design the consultation? What questions will be asked? What are the answers? What is the Government’s response to those answers? That is a great worry, particularly on the SME point, and here I thank my noble friend Lord Hunt for his professional contribution.
I worked in industry for a great deal of my career, and for quite a lot of the time I was involved with small and medium-sized enterprises. I cannot imagine any of those that I was involved with thinking of going into a collective action unless they were represented by their trade association or some body that would manage to get itself organised in such a way that it could be defined as a trade association, which is not a very difficult thing to do. The idea that bodies representing consumers and trade associations are not wide enough but all that needs adding are small and medium-sized enterprises does not seem to run.
I will think very carefully about what was said about this amendment and what was said in reply and see whether there is a case for bring the matter back at Third Reading, obviously on a somewhat different basis. In the mean time, I look forward to the assurance that there will be meetings with people who know about these matters before the consultation goes out.
It is quite surprising that the legal profession, apart from my noble friend Lord Hunt, has been absent from these discussions. The legal profession is very keen to participate in your Lordships’ discussions. This is a major change in the law. We had very helpful assistance from the noble and learned Lord, Lord Hope, but no other. That is quite surprising.
I retain the apprehension that this is a minefield and that we may get blown up. I beg leave to withdraw the amendment.
Amendment 41D withdrawn.
Amendments 41E to 41K not moved.
41L: Schedule 8, page 114, line 25, leave out “Subject to subsection 6,”
My Lords, I shall speak also to Amendments 41M and 41N. We are still concerned with the implications of Schedule 8, and here we get to the vulgar question of the distribution of the money. This group of amendments is designed to ensure that professional advisers benefit financially only commensurately with the take-up by consumers.
As presently drafted, proposed new Section 47C(5) requires that,
“any damages not claimed by”—
“within a specified period must be paid to the charity … prescribed by … the Lord Chancellor”.
So far, so good, but subsection (5) is subject to subsection (6), which allows the tribunal to order that these unclaimed damages,
“be paid to the representative in respect of all or part of the costs … incurred”,
which will presumably include legal and other fees. This surely cannot be right or just. Let us take the case of an opt-out class that assumes that 100,000 consumers were affected. Let us assume that only 20,000 consumers claimed. Under the Bill as drafted, the professional advisers could be paid 100% of their fees, even though only 20% of the affected consumers received any compensation. Amendment 41L would remove the let-out available to the CAT in subsection (5) and Amendment 41M would require that costs be paid out only in strict ratio to the payments to consumers.
My amendment has another useful by-product. Under opt-out class actions, no one can tell precisely how many consumers have been affected because they do not have to reveal themselves. Presumably the representative of a class and the CAT will agree an estimate of the likely number. In the Bill, however, there is no incentive—perhaps even the reverse—for the representative to seek out and provide compensation to those consumers affected. It must surely be important for the representative to have to make a genuine effort to find the disgruntled consumers, and Amendment 41M would give a direct incentive so to do. If we do not do this, we risk replicating what have become known in the US as “coupon settlements”, under which advisers take 100% of their fees and offer affected consumers the sum awarded, say $20, in the form of a reduction on their next purchase in the store affected. Many consumers do not claim; even fewer who have claimed ever use the coupon.
Amendment 41N would merely replicate the provision in respect of new Section 49A where a collective proceedings order has been made. This seems equally important because, as I understand it, this involves a case where parties have agreed a settlement without going through the difficulties, expense and time involved in proceedings and then go to the CAT for approval of the deal they have struck. There must be a real danger that in the course of negotiating the settlement the professional advisers will suggest that a useful part of the settlement could be that their fees are paid in full. A defendant may then be inclined to accept that requirement in an attempt to ensure a speedy settlement.
This group of amendments, like the others which we have been discussing tonight, are designed to put consumers and not professional advisers at the centre of our deliberations. They give the tribunal some additional statutory protection against the pressures that will, I fear, be brought to bear on them. I beg to move.
My Lords, I strongly support my noble friend for all the reasons I outlined a little earlier. His Amendments 41L to 41N seek to promote the interests of the consumers above those of others and should therefore be warmly welcomed. If the representative person and the lawyers and funders working with them are incentivised to find enough of the consumers to make the compensation process worth while, that must be the right way forward. Surely the worst thing we could do is create a system that is intended to provide greater benefit to consumers and succeeds in taking money from the guilty parties, but then fails to pass it on to the consumers themselves. The case is so strongly made, and I support it wholeheartedly.
My Lords, Amendments 41L, 41M and 41N place certain restrictions on the amount of legal costs that can be awarded to a representative. The Government agree with my noble friend Lord Hodgson: they do not want lawyers gaining excessive financial benefit from this regime. Any damages should be awarded to the claimants. We agree with the overall objective of getting the cash to consumers. For that reason, the Government have placed in the Bill measures to restrict the costs lawyers can claim.
The first key safeguard is that the CAT must certify that a representative is suitable to bring a collective action. The draft secondary legislation requires the CAT to consider whether the representative has a material interest that conflicts with the interest of class members. That means a law firm will not automatically be able to bring a claim. Secondly, the Bill prohibits the CAT from awarding treble damages, which limits the scope of unclaimed damages. Thirdly, the Bill contains restrictions on the financing of claims because it prohibits damage-based agreements, which means that lawyers cannot take away some of the damages from claimants. The Bill also does not provide for a claimant to be able to recover any uplift in legal costs from a conditional fee agreement—so-called no-win no-fee agreements.
A conditional fee agreement provides for a success fee for lawyers who win a case. Unlike standard legal fees, which can be recovered from the losing party, a conditional fee agreement has to be paid by the party being represented. In a collective action case, that may be the consumer organisation or the trade body. Therefore, it is in their interest to avoid conditional fee agreements or, where they enter into them, to negotiate the success fee so that it is as low as possible.
It is imperative that damages are paid to claimants. Therefore, if a representative wishes to use any unclaimed damages to cover their legal costs, two stages are set out in the Bill. This comes to the heart of the points that my noble friend Lord Hodgson raised. First, legal costs may be recovered from unclaimed damages only after claimants have had an opportunity to come forward and claim their damages. That means that if all claimants come forward and claim their redress, there will be no unclaimed damages to apply for to pay legal costs.
Secondly, any award of unclaimed damages has to be approved by the CAT. Additionally, the draft CAT rules, which noble Lords will recall is secondary legislation on which we will consult, require the CAT to consider the ability of the representative to cover legal costs if ordered to do so and will require an estimation of the legal costs. Any further restrictions may discourage representatives from taking on these cases completely, as they will have very limited means of recovering their costs, which may mean that the consumer receives little or no redress.
I hope that my noble friend is reassured by the discussion we have had on these three amendments that we are aware of the concerns around introducing an opt-out regime; that we have addressed the concerns that have been expressed through safeguards; and that we stand ready to undertake a strong consultation on some of the details we have debated. I hope that he feels able to withdraw his amendment.
My Lords, there is no half a loaf on this lot, that is for sure. This is not even a small slice. I listened carefully to what my noble friend had to say. She repeated some parts of the Bill, which my noble friend Lord Eccles had already said we are not entirely happy with, to be quite candid. She also said quite a lot quite quickly. I would not like to pretend I could take in the full implications, so I will read that very carefully.
One of the issues she did not address was: what incentive will we have under the new regime for the representatives to find the people and pay them? If they can possibly be paid their fees without finding the consumers, why will they bother? I honestly do not think that we have had a satisfactory answer to that point. We need to find a way to deal with the people who are putting those accused to a great deal of time, trouble and expense, and then do not take the trouble to make sure that they are paying out to the affected parties. We have a gap in the rules here and in the way we are approaching this. I hope that my noble friend will think carefully about that. I will certainly want to before we get to Third Reading next week or whenever. In the mean time, I beg leave to withdraw the amendment.
Amendment 41L withdrawn.
Amendments 41M and 41N not moved.
42: Schedule 8, page 120, line 38, at end insert—
“(3A) The CMA may approve a redress scheme under subsection (2)(b) subject to a condition or conditions requiring the provision of further information about the operation of the scheme (including about the amount or value of compensation to be offered under the scheme or how this will be determined).
(3B) If the CMA approves a redress scheme subject to such a condition, it may—
(a) approve the scheme subject to other conditions;(b) withdraw approval from the scheme if any conditions imposed under subsection (3A) or paragraph (a) are not met; (c) approve a redress scheme as a replacement for the original scheme (but may not approve that scheme subject to conditions).”
My Lords, with this amendment we turn our attention to Schedule 8 and focus on some other aspects of competition law.
Effective competition is good for the consumer, and this part of the Bill reforms the regime for private actions to give businesses and consumers redress where they have been harmed by anti-competitive practices. However, the current private actions regime is not delivering the redress to consumers or SMEs that we would like. Therefore, Schedule 8 reforms the existing regime. As part of those reforms, the Government recognise that business may want to offer redress voluntarily, so the Bill provides for the Competition and Markets Authority to approve redress schemes.
It is imperative that, for the business to make use of redress schemes, we strike the right balance in incentivising business and providing redress to consumers. This amendment allows for the CMA to approve an outline of a redress scheme when the CMA finds a breach of competition law. That removes the requirement for a business to submit a complete scheme at that time. That change is being made to prevent businesses being deterred from putting forward a scheme at an early stage. Businesses are concerned about disclosing information while still under investigation and the costs of setting up a scheme which may ultimately not be approved by the CMA.
If the CMA approves the outline redress scheme, it will be able to impose a deadline by which the business must have complied with conditions necessary to set up the full scheme. Once the full scheme has been created, the amendment allows the CMA to withdraw its approval of the scheme if it has not complied with the conditions. It also enables a revised scheme to be considered. I beg to move.
My Lords, we support the intention of this amendment. I know that it has been brought to the attention of BIS that Which?, certainly, is worried that the wording would not have the effect it wants. It looks as if the CMA will be bound into a pre-approved school and cannot object to it later because of the inability to revoke pre-approval once given. This is technical and not for tonight; if between now and Third Reading the Government’s lawyers concur with Which? that the wording is not quite right, perhaps we could bring it back and help it at that stage.
My Lords, I am grateful to the noble Baroness. I was aware that Which? had expressed some concerns during the course of today. The amendment actually flowed from the work of the private actions working group, which involved different stakeholders on this Bill. We have had discussions with Which? and we are happy with the form of the amendment. I can brief the noble Baroness separately if she wishes, but I do move the amendment.
Amendment 42 agreed.
43: Schedule 8, page 120, line 40, at end insert—
“(4A) But, where the CMA approves a redress scheme subject to a condition of the kind mentioned in subsection (3A), subsection (4) does not prevent further information provided in accordance with the condition from forming part of the terms of the scheme.”
Amendment 43 agreed.
44: Before Clause 81, insert the following new Clause—
“Insurance cover for money received or held by lettings agents in the course of business
(1) Subject to the provisions of this section, a person may not accept money from another person (“T”) in the course of lettings and property managing agency work unless there are in force authorised arrangements under which, in the event of his failing to account for such money to the person entitled to it, his liability will be made good by another.
(2) In this section T is any person who seeks residential accommodation which is to let or who has a tenancy of, or other right or permission to occupy, residential premises; and a “relevant payment” means any sum of money which is received from T in the circumstances described in subsection (1).
(3) In this section “lettings agency work” has the same meaning as in section 83 of the Enterprise and Regulatory Reform Act 2013 (redress schemes: lettings agency work) and a “lettings agent” is a person who engages in lettings agency work.
(4) In this section “property management work” has the same meaning as in section 84 of the Enterprise and Regulatory Reform Act 2013 and a “property managing agent” is a person who engages in property managing work.
(5) The Secretary of State may by regulations made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament—
(a) specify any persons or classes of persons to whom subsection (1) does not apply;(b) specify arrangements which are authorised for the purposes of this section including arrangements to which an enforcement authority nominated for the purpose by the Secretary of State or any other person so nominated is a party;(c) specify the terms and conditions upon which any payment is to be made under such arrangements and any circumstances in which the right to any such payment may be excluded or modified;(d) provide that any limit on any such payment is to be not less than a specified amount; and(e) require a person providing authorised arrangements covering any person carrying on lettings agency work to issue a certificate in a form specified in the regulations certifying that arrangements complying with the regulations have been made with respect to that person.(6) Every guarantee entered into by a person (in this subsection referred to as “the insurer”) who provides authorised arrangements covering a lettings agent shall insure for the benefit of every person from whom the lettings agent has received a relevant payment as if—
(a) the guarantee were contained in a contract made by the insurer with every such person;(b) except in Scotland, that contract were under seal; and(c) where the guarantee is given by two or more insurers, they have bound themselves jointly and severally.”
Amendment 44 stands in the name of my noble friend Lord Stevenson and myself and is about client money protection. It would require every letting agent to have the money they hold either belonging to the tenant, because it is being paid by way of advanced rent, or belonging to a landlord in that it concerns rents received but not yet handed on, to be protected, so that even if the letting agent were to disappear or go bankrupt, such money would be safe and available to the tenant or the landlord. This is something that is required of lawyers, of other professionals and of estate agents, who hold money belonging to others. It is what is needed for rents collected by letting agents on behalf of landlords. It is not their money, and it should be held separately in a protected client account.
It is no small issue. We know of at least 500 cases of letting agents taking money from tenants as a holding fee, but then not letting them move in and keeping the money. This autumn we saw an agent, Mr Glasson, jailed for 21 months because he unlawfully and dishonestly kept rents and deposits; Mr Jackson of Suffolk Lettings stole £70,000 from landlords; and another letting agent, Mr Farrer, stole £17,000 in rents and deposits. This money was neither paid back to tenants nor passed on to landlords. Shirley Player was jailed for stealing £400,000 in this way.
This is money that is not going into the housing market. It is depriving landlords of their income, and tenants of their security. Amendment 44 is supported by landlords as much as it is by tenants. It is backed by the National Landlords Association, the Royal Institute of Chartered Surveyors, the British Property Federation, the Association of Managing Agents, the Association of Letting Agents, the Property Ombudsman, Ombudsman Services, Crisis and Shelter. It was also recommended by the CLG Select Committee in the other place. As David Cox, who leads ARLA, said, client money protection,
“is fundamental for tenants and landlords to ensure they have peace of mind should an agent go bust or take off with their funds”.—[Official Report, 3/11/14; col. GC 594.]
Similarly, a director of Kinleigh Folkard and Hayward said that it should be compulsory for all agents to subscribe to a client money protection scheme. Again, Savills urged the Government to make it compulsory for letting agents to have client money protection. It said that millions of pounds of consumers’ money is being paid to letting agents, despite the fact that,
“anyone can open a letting agency unregulated and with no checks on their bona fides”. —[Official Report, 3/11/14; col. GC 594.]
We are talking about vast amounts of money. It is estimated that perhaps £2.7 billion is held at any one time—in other words, rents collected but not yet paid on to a landlord. We want every letting agent to maintain a segregated client bank account for such client money, with written confirmation from the bank that all money in that account is the client’s, and—importantly—that the bank is not entitled to combine that account with any other account, nor exercise any right to offset money in the client account, because any sum has been owed to the bank by the agent.
There is also client money protection insurance. That would ensure that when an agent fails to manage a client account properly, the landlord can claim against the scheme, because the largest losses are where a letting agent goes into liquidation and the client account has been emptied by the agent. Ombudsmen cannot help in those circumstances; it is simply no good making an award against a bankrupt agency. We know, for example, that when the London Housing Solutions agency went into administration, 100 landlords were left without the rents that had already been paid over by their tenants, but which never reached them. Amendment 44 would require letting agents to have appropriate client money protection to safeguard both landlords and tenants.
I think that the Government were convinced by our argument, and by the representations of RICS, landlords and everyone else in Committee. However, instead of saying, “Yes, this is the right thing to do”, and making letting agents the same as estate agents—which, as it happens, hold very little money—the Government have said, “Well, let’s get letting agents to say whether they have client money protection”. That is in Amendments 44A, 44B and 44C, that the Government have tabled. But that is an absolute damp squib. Any letting agent that already has client money protection already tells you that. They do not need this Bill to make it known; they boast about it. The problem is not the people who have got client money protection, it is the letting agents who have not got it.
The Government amendments would, I am afraid, add nothing, and they would not help tenants at all, because tenants cannot shop around to find a different letting agent. The landlord does at least have some choice, so at the point they choose the letting agent, they can see whether they have client money protection; but they cannot keep on checking on it after that. The tenant has absolutely no ability to shop around. They have to pay the rent to the letting agent selected by the landlord, with absolutely no guarantee that the rent will actually reach the landlord.
The Minister has said in Committee that the client money protection that we have been urging could,
“make it difficult to encourage landlords to invest in properties”.—[Official Report, 3/11/14; col. GC 600.]
But it would have completely the opposite effect. It is the security given to landlords by client money protection that will encourage them to invest, knowing that all rents that are being made over to the letting agent by tenants are safe and sound.
This amendment is wanted by tenants, by landlords, and by reliable agents. I beg to move.
My Lords, I listened carefully to the debate we had on this issue in Committee, and to the points made today by the noble Baroness, Lady Hayter. I remain concerned that requiring letting agencies to belong to a client money protection scheme would introduce significant costs into this sector, which could have implications for rent levels and the availability of affordable rental properties.
Requiring agents to pay to belong to a client money protection scheme is forcing honest agents to buy insurance against themselves being fraudulent—something the vast majority of agents are not. Let me explain. There are two main reasons why a landlord or tenant could lose money that is held by a letting agent: the first, as already mentioned, is that the agent is fraudulent; the second is that the agent has gone bankrupt.
While I agree that an agent will not always know that they are about to go under, client money held in registered client accounts agreed in advance with the bank will be protected and returned to the client, rather than used to settle the agent’s debt. This is standard business practice and is not expensive. Good agents can therefore protect their client’s money without having to join expensive third-party insurance arrangements. These arrangements would be expensive. I am aware that good agents may do this already and that deposits must already be protected by law, but they are not as complex and expensive as they would be as a result of this amendment.
I turn to the government amendments. I do not believe that excessive regulation in the lettings sector is desirable. We have made changes but we have to be careful. I appreciate the level of support for action, both in this House and externally. I can see benefits in requiring letting agents to publicise whether or not they are a member of a client money protection scheme. We therefore propose to extend the transparency measures already in Part 3, Chapter 2 of the Bill to include such a requirement.
Tenants’ security deposits are already protected as a result of existing legislation; that vital bit of tenant protection is already in place. What we now need is to raise consumer awareness that, if landlords and tenants want protection for other money held by the agent, they should choose an agent who carries the Government’s kitemark, Safe Agent. Membership of that scheme requires agents to belong to a client money protection scheme. Requiring agents to state publicly whether or not they are a member of a client money protection scheme will encourage landlords and tenants to choose an agent based on level of service, rather than just on what fees they charge.
In addition, given that all letting agents are now required to be a member of one of the three government-approved redress schemes, I propose to further extend the transparency requirement to require letting agencies to declare which redress scheme they are a member of. This should make it much easier for local authorities to enforce this requirement, but the real benefit will be in raising consumer awareness of this important new right and in making it easier for tenants and landlords to complain about any poor service they receive. This will ensure that good practice squeezes out bad practice: it is not a damp squib. Transparency will encourage landlords and tenants to choose agents with client money protection, without introducing significant costs into the sector. Ensuring tenants know their rights and landlords their responsibilities will empower consumers to make the right choices, and, if things go wrong, to find appropriate redress.
These changes, coupled with existing consumer protection rights, mean that we believe that the balance of regulation for the lettings sector is now about right. I have agreed to review our new provisions on transparency in a year’s time to ensure they have had the desired effect. I therefore propose to move Amendments 44A, 44B and 44C, and I ask the noble Baroness to withdraw Amendment 44.
The Minister clearly did not hear what I said: tenants cannot choose the letting agent. They cannot shop around. It is the landlord who chooses the letting agent. There is absolutely nothing that they can do to choose a letting agent—to whom they are going to pay their rent—who has client money protection. I find that extraordinary. The landlords, the tenants and the professional bodies all want this amendment. The current system is not working. Letting agents are going bust, leaving landlords without their money. I cannot believe that that is what this House, or indeed the Government, really want. I wish to test the opinion of the House.
24 November 2014
Division on Amendment 44
Amendment 44 disagreed.View Details
44ZA: Before Clause 81, insert the following new Clause—
“Protection of consumer interests in the housing sector
Schedule (Protection of consumer interests in the housing sector) has effect.”
My Lords, Amendment 44ZA seeks to bring some trust into the overheated housing market and to ensure that tenants are treated fairly. We start with the simple proposition that estate agents should not charge both buyers and sellers for the same service and that letting agents should not charge landlords and tenants for the same thing. That sounds obvious. An estate agent surely can have only the seller or the buyer as his client, not both. It is unethical, not simply being paid twice for the same job but to have a conflict of interest since the seller wants the highest price and the buyer the lowest. The estate agent is selected and paid by the seller to represent his interest. It is therefore indefensible to take money from the buyer and de facto have him also as a client and owe him a duty of care. The amendment would therefore outlaw a contract which allowed agents to charge both buyer and seller or indeed both landlord and tenant.
It is particularly important to deal with estate agents as they are not covered by the Government’s own amendments requiring letting agents to disclose their fees. Furthermore, with instances of estate agents charging buyers up to 2.5% of the house price, that is thousands of pounds not going into the housing market but to those who prey on its consumers. These rip-off charges—and there is no other word for them—which exploit buyers and tenants and breach the client relationship with a vendor or with a landlord must be stopped. We know that the Minister has serious concerns about double charging as she said so in Committee. However, instead of doing something about it, she worried about what she called “unjustified new burdens” and the risk of damaging this important industry. It was unclear whether she was referring to the estate agency industry or to housing. However, it can surely only help the housing market if agents are trusted and act ethically.
The second part of Amendment 44ZA would ban letting agents from taking a finder’s fee from tenants. This is a new and growing—and I think unacceptable—practice. Again, as we mentioned in the earlier amendments, letting agents are chosen by and work for landlords who are seeking tenants. The client is therefore the landlord to whom by contract and law obligations and duties are owed. The letting agent is paid by the landlord to find a tenant though often does other things such as collecting the deposit, handing over keys and collecting rent. It is done on behalf of the landlord who pays for the service. However, what we are now seeing, especially where young people are desperate to find somewhere to live, is that potential tenants are being charged by the letting agent to show them a flat. Alex Hilton, the director of Generation Rent, says that a ban on the “abusive practice” of charging fees to tenants is long overdue. He says:
“Tenants are being milked by agents taking advantage of a housing market that’s failing to provide enough homes”.
It is bad business where one person has a duty of care to both sides of a contract. Whose interests, after all, are they then representing? Traditionally, it has been the landlord, but once money has been taken from a potential tenant, there is surely an obligation to that tenant, who under the Bill will have rights because they have paid for a service. However, there is a clear conflict of interest for the agent. Under the Bill, tenants will get these new consumer rights if they pay an agent, so it is hard to see how the agent can square that with the obligation he has to his original client, the landlord.
We have no problem with letting agents charging tenants for an individual service, such as obtaining the credit reference for a landlord to accept them. However, letting agents should not be paid twice for the same work. Furthermore, just when we are keen for more landlords to enter this market and provide more accommodation—but where tenants, needless to say, have fixed amounts to spend on their housing—a chunk of money out that is going to neither the landlord nor the tenant is being leeched of the housing market if letting agents are charging this extra amount to the tenant.
Scotland made charges to tenants, other than for rent and deposits, illegal in 2012, so letting agents can no longer charge tenants, since when this Government have tried to argue that this meant increased rents in Scotland. One study, admittedly from an estate agent, purported to show this. However, that study by LSL Property Services, which claimed that a 2.3% a year increase in Scottish rents had proved that that was because of the ban on fees to tenants, did not actually prove that—partly because that figure was only marginally higher than that same organisation’s own figures for the increase in rents in England and Wales, but even more because the Scottish figure was lower than for the north-west of England. Furthermore, the Scottish increase started a whole year after the ban on fees to tenants, which suggests that other factors were at play.
Meanwhile, Shelter commissioned two independent reports, by Rettie & Co and by BDRC Continental, which found that landlords in Scotland were no more likely to have increased rents since 2012, when the ban on letting agents charging tenants was introduced, than landlords elsewhere in the UK. Indeed, fewer than one in five agents had increased their fees, even to landlords, while 70% of landlords had not noticed any increase in their fees paid to letting agents.
There is an issue of principle here. The renter is not the consumer of letting agents’ services and has no contractual relationship with the agent. The renter cannot shop around or negotiate on price. These fees must stop.
Finally, I turn to Amendment 50E in this group, which would help protect tenants against retaliatory eviction—that is, having made a complaint about their landlord, being evicted under a Section 21 notice, which does not require the landlord to give any reason. We do not seek to outlaw Section 21 altogether but to stop it being used to stop tenants getting necessary repairs done. Our amendment would require the Government to issue guidance on how tenants can be protected from such retaliatory evictions. Sadly, Citizens Advice and tenants cite far too many cases of retaliatory eviction or threats of it for this simply to be a rare occurrence. As the Observer reported yesterday, when a tenant told the landlord,
“our shower was dangerous, his response was to evict us”.
Shelter says that about 200,000 people a year—about 2% of renters—are subject to revenge evictions. In preparing its report on creating a better private rented sector, the all-party parliamentary group heard from witnesses of fears that inhibited tenants from expressing concerns, because these sorts of evictions, sadly, are not illegal.
The Government undertook to outlaw revenge evictions and ensure that tenants could not face losing their homes simply because they asked for essential repairs to be made. The Government have given their backing in principle to a Private Member’s Bill in the other House to stop rogue landlords who, rather than meet their legal duty to keep properties up to standard and get rid of safety hazards, instead evict tenants who complain. As the Communities Minister, Stephen Williams, acknowledged, there is a “minority of spiteful landlords”. He said that he wanted to ensure that hardworking tenants are,
“not afraid to ask for better standards in their homes”.
We concur with those views. If the Government want to see progress, Amendment 50E is a natural first step. I beg to move.
My Lords, I will confine my remarks to Amendment 50E:
“Protection of tenants against retaliatory eviction”.
As a landlord in the private rented sector, I am firmly against any landlord who engages in such practices as retaliatory eviction. In my 30 years or so of being a landlord, I have never had to resort to issuing—or come close to issuing—a Section 21 notice.
I have three points to make. First, the definition of a retaliatory eviction in this amendment is too broad. It would create massive uncertainty about what is and what is not an unreasonable eviction. A much clearer definition is needed that makes it abundantly clear that it does not include failure to pay rent or committing frequent anti-social behaviour, to give just two examples.
Secondly, we are being asked to agree to this amendment without knowing the extent of the problem. Responding to a Question, my honourable friend Brandon Lewis, the Housing Minister, said that the Government did not hold data on the extent of the problem, and nor did anybody else. That was true until Shelter conducted a YouGov poll that found that just 1% of private sector tenants had been evicted or served with a notice to evict in the last year because they complained to their council about a problem with their home that was not their responsibility. Only 7% of tenancies are ended by landlords, mostly because they need to take possession in order to sell or to move into the property themselves or to undertake refurbishment—or because the tenants are not paying their rent or are committing frequent anti-social behaviour.
My third point is that there are already existing laws in place that give tenants all the protection that they need. In June, the Competition and Markets Authority issued guidance on the relationship between landlords and tenants. This guidance states that, under the terms of the Unfair Trading Regulations 2008, derived from the Consumer Protection Act, it is a breach of these in the case of,
“any commercial practice that, in the context of the particular circumstances, intimidates or exploits consumers such as to restrict (or be likely to restrict) their ability to make free or informed choices in relation to a product, and which cause or are likely to cause the average consumer to take a different transactional decision. These are known as aggressive practices”.
In the examples of what constitutes aggressive practices, the guidance includes,
“threatening the tenant with eviction to dissuade them from exercising rights they have under the tenancy agreement or in law, for example where they wish to make a complaint to a local authority about the condition of the property, or seek damages for disrepair”.
Likewise, evicting a tenant as a punishment for a complaint is unfair practice, as the Competition and Markets Authority recognises. In either case, a Section 21 notice should not be enforced by the courts.
What is needed is not more law, but better information for tenants to understand their rights. Simply put, there is already ample protection for tenants, as I have tried to explain. In too many cases, they do not know that it exists.
My Lords, I will speak in support of Amendment 44D. Like others before me, I have recently been engaged in trying to find alternative accommodation in London. I spent mornings going around the letting agencies looking for suitable properties. The difference in the range of fees and expectations of me were enormous, but it was only by asking that I found out what fees the agents would be charging and at which stage. Rarely was this information volunteered.
Once I had found a property that I thought would suit, I was told I would need to put down a holding deposit. Not having previously been involved in renting a flat, this was a new experience for me. Obviously those of us who hail from the country are not used to your London ways. I did some research and found that, unless I put down this deposit, I would be unlikely to secure the flat while the necessary references and checks on me were taking place. I was assured that on completion date the holding deposit would be deducted from the rental deposit required, but I did blanch somewhat at being asked for six weeks’ rent upfront in addition to the first month’s rent. However, this is how things are done and so I will be complying. I move at the beginning of December.
People who live in London are well used to agents fees but they do not find them acceptable. A gentleman from London has made contact with us. He is moving homes on 15 December and will have been charged over £300 in agency fees between two property agents. In his view, these fees are totally unconnected to any actual letting costs and are unnecessary and unjust. I agree with him. He and his flatmates are all fortunate people. They all work for a living and consider themselves a hard-working family. Despite this, none of them could ever afford to own the rental home they live in and they have little choice but to rent privately in London.
This is a depressing prospect for many families and working individuals. If people have no option but to rent, it is unreasonable that they should be charged large fees just for being “introduced” to a property. The agents will also be charging the landlord a fee for effecting the introduction. This could be a double whammy, as the landlord passes this fee on to the tenant through the rent, although, as we have heard, this has not happened in Scotland.
While I accept that fees may, in some cases, be necessary, far more transparency is needed. I would very much like to see an end to the practice of agency fees in England and Wales and I hope that my noble friend the Minister will agree with me.
My Lords, I am grateful to the noble Baroness, Lady Hayter, for her comments and to my noble friend Lady Bakewell of Hardington-Mandeville for sharing her experiences.
The Government have already taken the opportunity of this Bill to increase transparency in the lettings market—an important change. In addition, a letting agent is already required to be a member of an independent complaints scheme. Now is not the right time to introduce yet further regulation on lettings, which will introduce greater costs into the sector. Instead, we have agreed to review these measures a year after introduction. That is the time to see whether the changes are working and whether further measures are required.
I turn to Amendments 44ZA and 44D. While I share the concerns expressed about the practice of charging both parties for a transaction by estate agents and lettings agents, I do not believe that regulation is the right way to tackle this issue. Many letting agents do share the cost of providing a service between tenants and landlords where both benefit from the service. This is consistent with standard practice in other industries—for example, auction houses—and is not considered to be double charging.
Letting agents are commercial operations and it is important that they are able to set their own terms and conditions without interference from government. Restricting these terms and conditions risks perverse consequences, such as increased fees for one party or an increase in fees for other services, such as property management and property searches. Mandating transparency, as we propose, will enable landlords and tenants to shop around, encouraging competition between agents on fee levels. Agents with the best-value services will prevail in the market, and that is what is best for tenants and landlords.
Turning to the possible prohibition of fees to tenants proposed in Amendment 44D, we see this as yet another example of a demand for blanket regulation which will only introduce costs, put off new providers, and ultimately reduce choice for tenants and deter lettings. Banning letting agents from charging fees to tenants is not necessary; transparency is a low-cost measure which will promote competition on fees. Transparency encourages agents to be competitive on their fees, and ensures that tenants and landlords are able to make informed choices.
Amendments 44ZA and 44D, concern a different strand of business but with some similarities. In fact, the local estate agent in my village has just sold her lettings business. The noble Baroness, Lady Hayter, expressed concern that estate agents are not covered by our amendments. I think she feels that they do not have to be transparent about their fees. I can assure the House that this is not the case. Under existing legislation, including the Consumer Protection from Unfair Trading Regulations 2008, estate agents must make fees and charges clear. She also talked about unethical agents but, in addition to the 2008 regulations, estate agents are regulated by the Estate Agents Act and they have their own industry standards.
Since concerns were raised in Committee about charging buyers as well as sellers, I am glad to say that we have continued to work with the Property Ombudsman, who has confirmed that updated guidance will be in place early in December. This guidance will address concerns raised by noble Lords at that time in relation to charging by estate agents and the need to avoid conflicts of interest. It will ensure that agents understand their obligations to make charging arrangements clear and avoid such a conflict.
In Committee, noble Lords also raised concerns that this non-legislative solution does not go far enough. However, estate agents must belong to a redress scheme. If they are removed from a scheme for breach of the code, including a breach of this new guidance, they would effectively not be able to work as an estate agent. That puts a considerable bite behind the obligations set out by these schemes. I would be happy to update noble Lords when the guidance is published.
As regards Amendment 50E, I agree that retaliatory eviction is a problem within the private rented sector. As the noble Baroness said, we have given support to action in the other place. I was very pleased to hear from my noble friend Lord Cathcart that as a landlord he is completely against the practice. He expressed concern and pointed out the circumstances in which tenancies normally end, bringing his experience of the sector to our proceedings. On 11 September, the Government announced their support, in principle, for the Tenancies (Reform) Bill, a Private Member’s Bill, which is designed to outlaw retaliatory action. As has been said, that Bill is due to have its Second Reading on 28 November. Our support is subject to the proviso that safeguards are put in place to ensure that the reforms do not bring in excessive red tape and so make it harder for landlords to evict tenants who should be evicted, for example, for non-payment of rent in circumstances as described by the noble Lord, and that the legislation does not impose unfair burdens on good landlords because of spurious or unfounded complaints.
We will produce a guide for tenants to help them understand how to identify health and safety hazards in the home.
If the Government are in support of this Private Member’s Bill in the Commons, which may or may not pass, why are they not prepared to see similar provisions written on the face of this Bill, in legislation that will get through Parliament?
I thank the noble Lord for his intervention and I will come to that point.
Perhaps I may pick up on the point about health and safety, which I know is another concern that I share with the noble Lord. There will be a guide for tenants to help them understand how to identify health and safety hazards in the home and what to do if the landlord does not take action to make the necessary repairs. Furthermore, our How to Rent guide, which was published in June, makes it clear to tenants that if a property is in an unsafe condition and the landlord will not repair it, they should contact their local authority, which can make the landlord deal with serious health and safety hazards.
We agree with the need to tackle the problem of retaliatory eviction, but we do not think that this amendment will add anything further to the guidance that is already available and which we have committed to. I am aware that some are concerned that the Tenancies (Reform) Bill is unnecessary as existing consumer law already provides protections. I have listened to the comments of my noble friend Lord Cathcart and his description of good practice, but the Government are clear that legislation is necessary: hence our support, in principle, for tackling this problem through the Tenancies (Reform) Bill. The noble Lord, Lord Harris, asked why we could not simply write this into the Consumer Rights Bill before us today. I have explained our attitude to the Private Member’s Bill. There are certain aspects of it that need to be debated and we are not happy simply to write it into the legislation as it is. We would like to see it debated in Parliament and we will obviously give it our support.
In the circumstances, I ask the noble Baroness to withdraw her amendment, and I look forward to her party’s support for the Tenancies (Reform) Bill.
The Minister has been very positive about the Private Member’s Bill and therefore it should be quite easy for her to give a commitment to the House that in any wash-up prior to the general election, the Government will move to salvage the good parts of that Bill if they are at risk of not getting through.
I thank the noble Lord, Lord Rooker, for his—
A noble Lord
What I was going to say is that the wash-up is a little above my pay grade. However, I note the point made by the noble Lord and I can confirm that we are supportive of that Bill on the terms that I have set out.
My Lords, my noble friend has made a good suggestion but it seems to me that the response could have been, “Let us have the debate in the Commons on Friday”, so that it could either come back here at Third Reading with the correct wording or, indeed, when this Bill goes back to the other place, as it has to do. I think that we have retaliatory eviction in the pocket; one way or another, we look forward to seeing it before May.
I do not understand some of the Government’s responses. Their idea is that this legislation could put off new providers. I do not know about everyone else’s high street, but we have quite enough in the way of estate agents and letting agents. The notion that they will not be set up because we legislate for them to provide decent treatment for tenants and landlords, and indeed for buyers and sellers, is not one that I accept. I thank the noble Baroness, Lady Bakewell, for her support because there we have it from a real consumer who went to a letting agent and saw what happened. Basically, you keep on paying but you are not sure what it is that you are paying for.
Our amendment would do two things. It would stop estate agents from charging sellers and buyers for the same service and it would stop letting agents from charging tenants what they have already charged landlords for. I wish to test the opinion of the House.
24 November 2014
Division on Amendment 44ZA
Amendment 44ZA disagreed.View Details
Clause 81: Duty of letting agents to publicise fees
Amendments 44A to 44C
44A: Clause 81, page 43, line 28, at end insert—
“(4A) Subsections (4B) and (4C) apply to a letting agent engaging in letting agency or property management work in relation to dwelling-houses in England.
(4B) If the agent holds money on behalf of persons to whom the agent provides services as part of that work, the duty imposed on the agent by subsection (2) or (3) includes a duty to display or publish, with the list of fees, a statement of whether the agent is a member of a client money protection scheme.
(4C) If the agent is required to be a member of a redress scheme for dealing with complaints in connection with that work, the duty imposed on the agent by subsection (2) or (3) includes a duty to display or publish, with the list of fees, a statement—
(a) that indicates that the agent is a member of a redress scheme, and(b) that gives the name of the scheme.”
44B: Clause 81, page 43, line 31, at end insert “or (where applicable) a statement within subsection (4B) or (4C)”
44C: Clause 81, page 43, line 32, at end insert—
“(6) In this section—
“client money protection scheme” means a scheme which enables a person on whose behalf a letting agent holds money to be compensated if all or part of that money is not repaid to that person in circumstances where the scheme applies;
“redress scheme” means a redress scheme for which provision is made by order under section 83 or 84 of the Enterprise and Regulatory Reform Act 2013.”
Amendments 44A to 44C agreed.
Amendment 44D not moved.
45: After Clause 86, insert the following new Clause—Student complaints scheme
Qualifying institutions for the purposes of the student complaints scheme
(1) The Higher Education Act 2004 is amended as follows.
(2) In section 11 (qualifying institutions for the purposes of the student complaints scheme) after paragraph (d) insert—
“(e) an institution (other than one within another paragraph of this section) which provides higher education courses which are designated for the purposes of section 22 of the 1998 Act by or under regulations under that section;(f) an institution (other than one within another paragraph of this section) whose entitlement to grant awards is conferred by an order under section 76(1) of the 1992 Act.”(3) In section 12 (qualifying complaints for the purposes of the student complaints scheme)—
(a) in subsection (1) for “subsection (2)” substitute “subsections (2) and (3)”, and(b) after subsection (2) insert—“(3) The designated operator may determine that a complaint within subsection (1) about an act or omission of a qualifying institution within paragraph (e) or (f) of section 11 is a qualifying complaint only if it is made by a person who is undertaking or has undertaken a particular course or a course of a particular description.””
My Lords, I would like to end by thanking the noble Baroness, Lady Hayter, for retabling this important amendment, which seeks to ensure that students in receipt of student support funding can access the dispute resolution scheme run by the Office of the Independent Adjudicator for Higher Education—the OIA. In Committee, the noble Baroness set out a cogent case for ensuring that higher education students receiving public support should have access to this valuable service. We listened carefully to those concerns. As the noble Baroness pointed out, the 2011 higher education White Paper, Students at the Heart of the System, had already set out our intention to require that all higher education students receiving public support should have access to external dispute resolution. This was part of a wider package of measures aimed at developing a new regulatory framework across higher education that required legislation to implement it.
Increasingly, there are new and different providers offering higher education, not just the traditional university sector. Currently, students at these newer higher education providers do not always have the right to take their unresolved complaints to the OIA. A handful of alternative providers have so far voluntarily joined the OIA’s complaints handling scheme. However, we think that all higher education students receiving student support should be able to access this service, and the only way to achieve this is by requiring it in legislation. We have now tabled a government amendment to enable a much wider group of students in future to have access to the OIA’s complaint handling scheme. In practical terms, it means that full and part-time higher education students in receipt of student support and studying at alternative providers and further education colleges in England and Wales will be able to bring a complaint to the OIA.
In future, these students will be able to ask the OIA to look at unresolved student complaints on issues such as an institution failing to deliver courses as advertised or courses that are not fit for purpose; misleading or untrue information about a course; and complaints about teaching and facilities, bullying and harassment and welfare issues. We should also expect to see an improvement in complaint handling arrangements at those institutions required to join the OIA scheme. A major part of the OIA’s role is also to spread good practice in complaint handling more generally. I beg to move.
My Lords, it is a genuine pleasure to thank the Minister for responding to the amendment that we tabled in Committee and improving the language somewhat from our draft. We are delighted by that. She may, however, be amused to learn that just yesterday, Which? published a new report. It is entitled A Degree of Value: Value for Money from the Student Perspective, and it calls for all higher education students to have access to the OIA. The report was published yesterday; students are going to get it in about 30 seconds’ time. I am not sure whether Which? will claim the credit, but it is nice that it will seem a quick win for it. We are delighted, and I know that the adjudicator is also very pleased that this will treat all students in the same way. I thank the Minister and we look forward to that being enacted.
Amendment 45 agreed.
Amendment 46 not moved.
Consideration on Report adjourned.