My Lords, Amendments 40, 41, 47 and 48 recognise the importance of consumer protection and consumer interests and I thank the noble Lord, Lord Whitty, for the opportunity to debate this important issue. I also know that the noble Baroness, Lady Hayter, has spoken strongly in favour of consumer rights and I note and acknowledge her interest in this area.
As we said in Grand Committee and in the other place, empowering and protecting consumers is a vital element of our approach to promoting growth in the UK economy. Indeed, in the coalition agreement, the Government committed to take action to protect consumers, particularly the most vulnerable, and to promote greater competition across the economy. That is why we have put consumer interests at the heart of the CMA, and in particular, by the following: first, by giving the CMA a single general duty to seek to promote competition for the benefit of consumers; secondly, to retain the OFT and Competition Commission’s markets powers that aim to make markets work better for consumers; thirdly, by giving the CMA primary expertise on unfair contract terms legislation and additional consumer enforcement powers to address business practices that distort competition or impact on consumer choice in otherwise competitive markets; and lastly, by transferring the OFT’s super-complaint function, which provides a fast track process for complaints by consumer bodies.
Given the vital role the CMA will play in protecting and promoting consumer interests, and this vast range of consumer functions, we do not consider that these amendments are required. Further, in some respects the amendments could produce the wrong result. Amendment 40 cuts across existing legislation where the CMA is required to consider a range of objectives. For example, in carrying out its regulatory appeals functions, the CMA must take into account the objectives of the sector regulators, which may include media plurality or energy security. A requirement for consumer benefit or detriment to be paramount in all its operations might therefore cast doubt on the ability of the CMA to carry out its regulatory appeals functions fairly.
Amendment 40 would also provide that “consumers” include SMEs where appropriate. While I agree with the sentiment, I do not believe that it is actually necessary to deal with SMEs in this way. The existing legislation has not to date constrained the OFT from considering business to business markets, because if there are competition issues in these markets they will usually ultimately affect end consumers as well.
With regards to Amendments 41, 47 and 48, as a core function of the CMA, I expect the board and panel members to have great expertise in consumer issues. However, it would be inappropriate to establish a legislative criterion of this kind for appointments to the CMA board and CMA panel. We should not impose unnecessary constraints on the sort of people who can be appointed to these. As is currently the case for the Competition Commission panel, we expect the CMA panel to be made up of a range of experts, such as lawyers, economists, accountants and business people. Between them, they have the range and depth of expertise to deliver on inquiries across the economy, including on consumer issues and different markets.
I now turn to Amendment 44. In the current regime, the OFT is not subject to a statutory requirement to estimate impact on consumers in relation to its work. At present the OFT and Competition Commission estimate the impact of their past work on consumers over a rolling three-year period, using a common approach. Looking backwards helps to make the impact estimates more precise, and looking over three years helps level out peaks and troughs in impact. Requiring the CMA to estimate impact of its future work would be significantly less precise and in many cases difficult to forecast. Merger cases, for example, are responsive to market developments, and the CMA cannot pre-empt the outcome of independent market inquiries. This amendment could also leave the CMA at risk of judicial review if forecasted consumer benefits were not realised, and it could incentivise CMA to underestimate, and underachieve.
On Amendment 51 we do not consider that the OFT’s function to promote “good consumer practice” needs to be transferred to the CMA. As we said during our debate in Committee, in the current regime, Section 8 of the Enterprise Act 2002 gives the OFT a general function of promoting good consumer practice, which recognises its leading role in providing consumer education, its function in relation to approving consumer codes and its international consumer advocacy work.
In the new consumer landscape, the Citizens Advice service will take the lead role in providing consumer-facing education from the OFT as well as taking over responsibility for consumer advocacy from Consumer Focus; the Trading Standards Institute will have the role of approving consumer codes. The CMA will continue to have an international consumer role—for example, to represent the UK at the OECD’s Committee on Consumer Policy. A specific provision has been made for this in paragraph 19 of Schedule 4 to the Bill.
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Equally, we do not consider that Amendment 53 is required. The amendment enables the Secretary of State to make a scheme in relation to the transfer
of the rights, properties or liabilities of local authorities, Trading Standards and the Citizens Advice service, to a Minister or the CMA. It does not allow for the transfer of consumer functions. Therefore, in effect the amendment would allow the Secretary of State to transfer, for example, staff or property from local authorities, Trading Standards and Citizens Advice to the CMA or a Minister without transferring the relevant consumer functions. We do not believe that this is desirable or workable.
I take note of the comments that were made by my noble friend Lady Oppenheim-Barnes. It may be an opportunity to reiterate again the aims of the Government combining the competition and consumer landscape in the reforms that they are delivering, to provide a better deal overall for consumers. The objective is to set out clearer responsibilities and to have better co-ordination between the enforcers and the consumer advisory bodies. For clarity, I should say that the Citizens Advice service will be the home for consumer advocacy, education, advice and guidance. Consumer enforcement will largely be the responsibility of Trading Standards, with the new National Trading Standards Board being responsible for prioritising national and cross-local authority boundary enforcement. The CMA will work with Trading Standards to ensure that there are no gaps in enforcement. As mentioned above, it will have primary expertise on unfair contracts terms legislation. Business education will be shared by the CMA and Trading Standards.
As was mentioned by the noble Lord, Lord Whitty, these changes will be made using two orders under the Public Bodies Act, and it is proposed that the first order laid in the House on 12 December 2012 will transfer Consumer Direct from the Citizens Advice services and modify the consumer enforcement legislation to enhance the role of Trading Standards. Finally, it is envisaged that the second Public Bodies Act order will transfer the functions of Consumer Focus to the Citizens Advice service. It will also transfer the OFT’s estate agency functions.
My noble friend Lady Oppenheim-Barnes also raised the issue of funding for the Citizens Advice service. I recognise my noble friend’s long experience in this particular area. The Citizens Advice service will be the home of consumer advocacy, as mentioned earlier, including education, advice and guidance. It will allocate an additional £3.72 million to carry out general consumer advocacy work, which was previously carried out by Consumer Focus. The Citizens Advice service will receive the appropriate budgets for energy and postal services advocacy, currently provided to Consumer Focus, once the regulated industries unit transfers to them in 2014.
I now turn to Amendments 42 and 43. There is already a system in place, introduced by the previous administration, for agreeing between Parliament and the Executive that the public appointments of government will be subject to a pre-appointment scrutiny hearing. Under this system, the Secretary of State discusses and agrees with the chair of the relevant Select Committee which appointments will have such a hearing. The Government in their response to the Liaison Committee’s report of Select Committees and public appointments
encouraged Ministers to engage with Select Committee chairs to ensure that the right appointments are receiving Select Committee scrutiny prior to appointment. The current system works well and the Government do not believe that there is any advantage in formalising this process in legislation in respect of individual roles such as the chair of the CMA. For this reason, we do not think it necessary for there to be a statutory requirement for this process.
Finally, I turn to Amendment 54. Ensuring that the new Competition and Markets Authority has the right expertise and experienced staff is essential. Clause 22 gives the Government the power to provide protection to staff in circumstances where TUPE is not engaged, and to make schemes to transfer staff to the new authority. I hope that this helps to answer the question raised by the noble Lord earlier. It would be inappropriate to accept Amendment 54 because applying the exact provisions of TUPE may not be appropriate in these circumstances. For example, the Secretary of State may wish to incorporate within any transfer scheme a provision that allows for greater flexibility in relation to post-transfer contractual variations so as to enable the CMA to seek to harmonise staff terms and conditions through agreement. This can assist the process of harmonising disparate reward packages and thus may reduce the risk of unlawful discrimination, particularly on equal pay claims, and avoid unnecessary barriers to reform.
I hope that noble Lords will forgive me for giving rather a lengthy answer to these amendments and I hope that the noble Lord will be reassured to some extent by my explanation of how the CMA will operate its consumer role. I hope that he will not press his amendment.