My Lords, the purpose of this order is, first, to finalise the transfer of the consumer education and advice function, including Consumer Direct, from the Office of Fair Trading to the citizens advice service, and to transfer the relevant industry levy arrangements; and, secondly, to ensure that consumer enforcement is allocated appropriately between trading standards and the OFT by amending consumer legislation.
The Government are committed to promoting growth in the UK economy and empowering and protecting consumers is a vital element of our approach. The current landscape of bodies responsible for these tasks is confusing, duplicative and therefore inefficient, leaving consumers uncertain as to whom to turn for help and advice when things go wrong. We recognise that there are many good things about the individual organisations but, taken together, they form a complex landscape that can be difficult for consumers to understand. For example, when someone has bought a faulty second-hand car they do not know whether to seek advice from the Office of Fair Trading, Consumer Focus, Citizens Advice or trading standards.
This complexity and the lack of clarity about divisions of responsibilities have led to gaps in enforcement. The National Audit Office’s 2011 report, Protecting Consumers – the System for Enforcing Consumer Law, found that consumer detriment occurs at national and regional level, but the incentives for enforcement officers are weighted towards tackling issues within their local authority boundaries. Similarly, the University of East Anglia’s 2002 report, which sought to benchmark the UK’s consumer empowerment regime, identified uneven enforcement as a key weakness.
The OFT estimated the cost to those consumers affected and the wider economy of rogue practices, such as intellectual property crime which occurs across local authority boundaries, to be at least £6.6 billion annually. Any gap in enforcement has, therefore, significant impact on members of the public and the wider economy. In response to the Government’s 2011 consultation Empowering and Protecting Consumers, there was widespread agreement that the current landscape of information and advice bodies is confusing and should be simplified.
This order will, first, confirm the premier position of the Citizens Advice services as the publicly funded bodies in England, Scotland and Wales providing information and advice to consumers. Citizens Advice will draw from consumer intelligence gathered by local bureaux and the telephone advice line to support the enforcement community as it prioritises its efforts to maximise outcomes for consumers.
At a national level, enforcement responsibility is currently split between trading standards and the Office of Fair Trading. Historically, the Government have provided support for national and cross-boundary schemes. These included projects to combat illegal money lending, enforcement against internet scams and a fighting fund for large and expensive cases which local trading standards might not otherwise have been able to take on. In light of the strong support for these proposals in the consultation, a decision was taken to create immediately the National Trading Standards Board, giving the trading standards profession greater responsibility for the funding and co-ordination of large national and cross-local authority cases. Our vision is for the majority of consumer law enforcement to be undertaken by Trading Standards with the support of the NTSB and the consumer enforcement bodies in Scotland.
Additionally, this order makes changes to the enforcement provisions of the OFT and Trading Standards, clarifying the responsibility of Trading Standards to tackle cross-boundary threats and cases of national significance. Let me be clear: this is not about adding to the powers of the enforcement agencies, but about clarifying their relative roles within the landscape so they can take up cases that more appropriately fall to them. Except in relation to unfair terms, Trading Standards will retain a duty to enforce consumer legislation while the OFT will have powers. This means that Trading Standards will take the lead, but the OFT will be able to step in to enforce, where appropriate. In relation to unfair contract terms, the OFT and, in the future, the CMA will retain primary expertise so they can take enforcement action in cases where there are structural market failures; for example, where there is evidence of market-wide problems on tie-in contracts.
Let me now turn to compliance with the Public Bodies Act. Section 8(1) of the Public Bodies Act provides that Ministers may make an order only where they consider that it serves the purpose of improving the exercise of public functions. Such orders must have regard to efficiency, effectiveness, economy and securing appropriate accountability to Ministers. I would like to address these points in some detail. The order is
focused on improving the effectiveness and efficiency of the consumer landscape. As I explained earlier, a variety of publicly funded bodies are involved in consumer advice and representation. The proposed changes will create a simplified and easily accessible and nationally consistent advice service for consumers.
The transfer of Consumer Direct from the OFT to the Citizens Advice services in April 2012 consolidated its position as the principle source of government-funded consumer advice. Citizens Advice has implemented a more efficient delivery model, increasing capacity to provide advice within existing budgets. The industry-paid levy to fund those consumer contacts in relation to the regulated gas, electricity and postal services industries will continue and will pass to Citizens Advice through this order. Empowering Trading Standards to take on more cases of national significance will ensure that national activity is linked to local intelligence. For example, there may be several reports of a rogue online trader from consumers across the country. The NTSB will be able to link these complaints and build a strong case for enforcement, which will have a national impact. This clarification of functions and improved co-ordination of enforcement will ensure better use of limited resources through more effective leadership and integration of effort at a national level. National funding for enforcement activities will facilitate a more integrated approach to national and cross local authority boundary threats. This activity will be more effectively co-ordinated at national level by chief Trading Standards officers. This will ensure that enforcement gaps do not arise and that activity overall is targeted to achieve better outcomes for consumers.
I turn to accountability. The work of Citizens Advice and the National Trading Standards Board will be accountable to the Consumer Minister through grant arrangements set up by the Department for Business, Innovation and Skills. These grant arrangements will set out challenging performance targets, which will be closely monitored by the department. The bodies will be collectively accountable through the Consumer Protection Partnership, which will also report to the Minister for Consumer Affairs on a six-monthly basis to ensure there are no gaps or duplication in enforcement within the reformed landscape.
These reforms focus on increased efficiency and effectiveness, rather than economic benefits. For this reason, the department took the decision not to provide detailed analysis around the economy test in the explanatory document. These changes are not predicated on economic savings, but on a need to deliver increased efficiency and improved service levels in the most economic way.
As your Lordships will know, members of the Secondary Legislation Scrutiny Committee asked for a fuller articulation of the economy considerations set out in the explanatory document which supports this order. The Consumer Minister wrote with additional details. When making its report on the order, the Secondary Legislation Scrutiny Committee noted that the Minister’s letter did not expunge the omission in the explanatory document and decided to exercise the enhanced affirmative process for consideration of the order as set out in the Public Bodies Act. The Consumer
Minister and I took full and due regard of the committee’s decision, noting in particular that it saw no reason to dissent from the view that the draft order meets the Act’s requirement to improve the exercise of public functions. The Government also conclude that the order meets the requirements of the Act and consider that it should be made.
For the benefit of the committee, I should like briefly to set out those economic benefits in the remaining few minutes. The enforcement proposals were estimated to have a cost of £3.2 million. The value of the benefits proved impossible to quantify, but included improved leadership and co-ordination of Trading Standards enforcement through the creation of the NTSB. There will also be better co-ordination of enforcement between Trading Standards and OFT/CMA, managed by the Consumer Protection Partnership. The transfer of consumer information, advice and education functions to Citizens Advice was assessed as delivering benefits of £6.3 million. This proposal will strengthen frontline consumer protection by forging a stronger link between the activities of Citizens Advice and provision of information, advice and education. Citizens Advice is highly regarded and respected by all, and its brand is much better known to consumers than Consumer Direct. As a result, Citizens Advice expects the volume of calls to increase over time compared to Consumer Direct. This proposal will also reduce the complexity of the consumer landscape and create opportunities for substantial synergies in data and IT infrastructure.
Let me remind the Committee of the key benefits of this order. First, it will finalise the transfer of the consumer education and advice functions to the Citizens Advice service, making the trusted brand of Citizens Advice the first port of call for consumers with a problem to solve. Secondly, it will enable a more appropriate allocation of consumer enforcement cases, enabling Trading Standards to take on more cases of national significance and ensuring that national activity is linked to local intelligence. I commend the order to the Committee and I beg to move.
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