Consumer Credit Bill

My Lords, it is with some trepidation that I follow the noble Lord, Lord Borrie, because he probably has more experience than many noble Lords in these matters, not only through his distinguished service with the OFT but in consumer credit matters generally. I warmly join him in congratulating my noble friend Lord Mawhinney on his most excellent maiden speech. In another place, he had responsibilities placed on his shoulders that normal mortals would have found extremely difficult to discharge. He did so with great distinction and great good humour and all of us, particularly noble Lords on this side of the House, welcome him most warmly. His light-touch, thoughtful and pithy style will be much welcomed in your Lordships’ House. My only qualifications for participating in this debate is to be one of a long line of former Ministers from the other place who had responsibility—briefly, for two years—for deregulation. I want to concentrate on and follow some of the points that the noble Lord, Lord Borrie, made. I am clear that the Bill should be welcomed as a whole. Clearly your Lordships, following convention, will welcome its Second Reading, but the devil is of course in the detail. I want to flag up some areas that I hope your Lordships will look at in Grand Committee—as I understand it will be if your Lordships so decide. In opening, the noble Lord, Lord Sainsbury, said that he and the Government wished there to be a fair, clear and competitive credit market. The noble Lord is right and the whole House would agree with him. The question is how those great principles are applied in the Bill. I would like to follow the noble Lord, Lord Borrie, in considering some aspects of the Bill in the light of Philip Hampton’s excellent report, which I hope that some of your Lordships will have had the chance to read. It was published for the Treasury in March 2005 and, as the noble Lord, Lord Borrie, said, is called Reducing Administrative Burdens: Effective Inspection and Enforcement. A survey shows that businesses generally are concerned about the cumulative burden of regulation. The estimates, which I have not heard challenged by the Government, are that the costs of regulation per annum vary between £20 billion and £40 billion—a staggering sum. To put that figure in statistics that your Lordships might better comprehend, David Arculus, the excellent chairman of the Better Regulation Task Force, commented in his report of March this year that if the Government could cut administrative costs of regulation on businesses in the United Kingdom, there could be a gain of about 1 per cent per annum of the GDP. That is a staggering sum and I believe that David Arculus is correct. There are three tests we should use in analysing not only the Bill as a whole but some of its detail, which we can come to in Committee. First, are the intrusion and the costs of regulatory burden minimised? I accept what the right reverend Prelate the Bishop of Worcester said; I agree with him and the Minister that this is a legitimate area for legislation, but it is also legitimate for the House to question exactly what the burden is on the supplier of credit as well as dealing with the fairness of the way in which industry conducts its business with the demanders of credit. I am not convinced that Clause 38, which gives a broad responsibility to the OFT, meets that test. We will need to return to it in some detail in Committee. The powers of the OFT need to be clear and much more limited than they are enshrined in the present clause. Your Lordships might be interested if I quote Philip Hampton on burdens. He was talking about risk and how the important principle is for a regulator to look at where the risk is and not seek to legislate for all aspects of business. In his report, he said that,"““risk assessment is not being implemented as thoroughly and comprehensively as it should be””" by regulators in the United Kingdom. He came up with a recommendation that:"““Comprehensive risk assessment should be the foundation of all regulators’ enforcement programmes””." If the OFT will be responsible for the years to come in administering the respective legislation it is important that it follows that principle. Secondly, is a level playing field maintained between the protection of the consumer and the profitability of the supplier? The noble Lord, Lord Sainsbury, spoke approvingly of that principle and I agree with him: he is right. The right reverend Prelate implicitly supported the principles of Clause 19, which deals with the unfair relationship between the supplier and the consumer of credit. But I agreed my noble friend Lord Mawhinney when he suggested that in Committee we should look at what that clause actually means. I am not satisfied that it meets the level playing field test. It needs further work and further clarity. The final test relates to something to which the noble Lord, Lord Borrie, referred. Does this legislation impede or permit the future consolidation of regulators, as Philip Hampton recommended? One option in his report was that both the OFT and the Financial Services Authority should cede powers to a new regulator, the consumer and trading standards agency. I join the noble Lord, Lord Borrie, in asking the Minister to confirm the timetable for the consolidation of regulators, particularly in the consumer credit field. Is it true that we are still looking at April 2009, which seems a long time away? I know that some senior people in the OFT are nervous about the OFT ceding responsibility to a new agency on the grounds that it could produce a worse situation—one that was more bureaucratic and less flexible. However, I was not entirely convinced by some of the comments made by the noble Lord, Lord Borrie. We need to look with a sceptical eye at whether it would not be better to cease the functions of the OFT and that part of the FSA’s responsibilities for consumer credit, and establish one regulator in place of a number of them. I conclude by echoing the comments of my noble friend Lady Miller. The noble and learned Baroness, Lady Clark of Calton, will be making her maiden speech and I am sure that she will deal with the debate in her normal courteous style. Last time I participated in a debate in this House, the noble Baroness, Lady Royall of Blaisdon, also made her maiden speech, which was a cracker of a winding up speech.