Consumers, Estate Agents and Redress Bill [HL]

I recognise the strength of feeling on this issue and I thank the noble Earl, Lord Caithness, for his passionate, knowledgeable and thoughtful contribution. He has, of course, a great deal of experience in this field, which I am sure noble Lords appreciated even more when he moved his amendment. However, let me try to explain the Government’s position on this important subject. The noble Earl referred to the Legal Services Bill. Of course, I am not dealing with that Bill, but my understanding is that it will not regulate estate agents as estate agents but as a part of alternative business structures, including lawyers. Nevertheless, I acknowledge that he made an interesting point. I will look into the matter further and write to him about it. Although Section 22 of the 1979 Act enables the Secretary of State to introduce regulations to require estate agents to meet minimum standards of competence before they can engage in estate agency, the section has never been implemented. It would be made more complicated by accepting the amendment. The OFT report published in 2004 followed a thorough two-year study of the market. The OFT considered whether positive licensing was necessary and concluded that it would not deal with the main identified causes of serious problems in this market. The Government share this view. The agent’s role as an intermediary and salesman would not normally require qualifications by law. There is little documented evidence that agents who have been banned would have been unable to obtain those qualifications if required to do so. The OFT found that in most cases where estate agents committed acts of serious misconduct that led to them being banned, the misconduct appeared to result from a lack of integrity by individuals rather than a lack of qualifications or knowledge of the law. Nor are qualifications a bar to dishonest practices in any profession; we can all think of many examples of professional misconduct in a number of professions. One or two interesting studies have been done. The OFT did a market study and found that in other jurisdictions where qualifications or licences were required for an estate agent to work, consumers experienced similar problems to those experienced in the UK. The OFT study found that most problems occurred through a lack of integrity rather than through any lack of knowledge or qualifications. Most estate agents who have been banned in recent years had no previous history of criminality, so would have been unlikely to have been screened out through any process that could have been introduced, whether through training or a series of qualifications. An example that has been given is the issue of a driving licence to someone. There is no guarantee that that person will not commit an offence or speed. I agree with a lot of what my noble friend Lord Borrie said. He gave us a brilliant exposition of minimum standards of competence. I agree that minimum standards of competence could restrict competition. That is at least arguable. You would therefore be creating a more or less exclusive club. That may raise prices in the market and restrict those in the profession, thereby almost creating a rather expensive closed shop, which is not to the benefit of consumers. So it is arguable, and at least debatable, that if you introduced minimum standards of competence, you would reduce competition and therefore adversely affect the benefits that consumers receive from downward pressure on prices, which reflects the ease with which estate agents can currently set up and enter the market. Of course, most good estate agents offer proper training schemes for their employees, so there are already estate agents who operate to proper professional standards. The issue is how you deal with the bad apples and the best way of dealing with them. It is debatable whether that should be through qualifications or, as we are suggesting, through a redress scheme that deals with the problems that arise. Based on considered evidence, the benefits to consumers from introducing compulsory qualifications are, in the Government’s view, unproven. There would, however, be costs. The industry bodies are keen to control standards themselves. This might be a cheap option for government but, as I have indicated, it will be the consumers who ultimately pay the price of allowing those bodies to control access to their industry. Some consumer groups advocate setting up a new independent regulator, which would be even more costly. I recognise the strength of feeling in the Grand Committee about this issue, but it is the job of government to weigh up the costs and benefits of all the options objectively using the evidence available. I have given some examples of that. As the regulatory impact assessment shows, any benefit from introducing mandatory qualifications for estate agents cannot currently be justified by the costs. The Bill will improve the current negative licensing system and require agents to join approved redress schemes. We believe that this is a more effective way of dealing with the significant problems in the industry without unnecessarily driving up costs to consumers.