My Lords, I thank the Minister for setting out this order in some detail. It is, of course, as he said, part of a wider strategy towards the transformation of the consumer landscape. Attached to the explanatory document is a paper which set out nearly two years ago the way in which the Government approached that matter. One or two things have changed in the interim, and there are one or two things with which I agree and one or two things with which I disagree. However, this is only part of a bigger jigsaw. As the Minister said, the order deals with the transfer of Consumer Direct to Citizens Advice and the OFT enforcement functions to the Trading Standards services of local authorities.
In principle, I strongly support the first of these. We of course referred to it in the process of the Enterprise and Regulatory Reform Bill, so there is some overlap in the discussions we have already had here and in the Chamber. Some of it—although I suspect the Minister is not allowed to say so—may come post 8 May in a new consumer Bill, which I know his department is considering either for the next Session or the Session after. So we cannot expect everything to be resolved by this order. Nevertheless, there are some issues which I think should have been, but are not yet, resolved.
Given the last encounter between myself and the noble Viscount, I should thank him for at least trying to follow the procedure under the Public Bodies Bill on this order, as distinct from the Agricultural Wages Bill. The order and the explanatory document answer a lot of questions. However, as he has recognised, the Secondary Legislation Scrutiny Committee has not been entirely impressed by the way he or his colleagues have dealt with the issue of economy and have therefore recommended the enhanced affirmative procedure. I shall come back to this aspect because it largely relates to the transfer of enforcement powers and I want to deal with the transfer of the consumer advice powers first.
As I say, I welcome the transfer to Citizens Advice, particularly given the general direction of the Government’s intent on the consumer landscape. Even without that, I would have regarded it as sensible to transfer Consumer Direct to Citizens Advice. However, I have a few questions. First, Article 2(3) states boldly that the OFT role’s in this respect is abolished, except to a limited degree in Northern Ireland, which I shall come back to. Does that mean that in this area the OFT has no oversight role? There is no quality assessment of how well Citizens Advice performs, and it will continue to be partly a directly publicly funded function and partly a function based on mandatory levies on various industries. I assume those levies are simply the levies that are currently raised for Consumer Direct purposes rather than the wider levies that go via Consumer Focus.
It seems somewhat odd that the oversight role in this area is abolished completely. My noble friend Lord Borrie was complaining that the oversight role in relation to enforcement is greatly diminished, but at least there is a role there. In this area, it seems that there is no potential intervention by a statutory body. This is important because Citizens Advice, for all its great wealth of experience and expertise and the great
respect in which it is held in the consumer movement and more widely, is a non-statutory body, and we are giving what was previously an administrative body supported by legislative powers responsibility for activity that was previously run by a statutory body. That presents a number of problems. In real life, they are probably resolvable, but it is odd to resolve them by abolishing the body that has ultimate, fail-safe oversight and by abolishing the new body’s responsibilities in that respect so that the CMA will have no responsibility in the area of consumer advice, as I read the effects of this order.
It is also interesting that the order does not mention consumer education, which is also being transferred to Citizens Advice. The OFT conducts quite a significant amount of activity on consumer education, and that does not seem to be explicitly covered here. Can the Minister assure me that it is subsumed in this? From the wording, it does not look as though it is, although I understand that the transfer has already been made.
The lack of a residual oversight role is important, but it also leaves Citizens Advice somewhat exposed. Articles 7 and 8 of the order and paragraph 4.6 of the explanatory document refer to Citizens Advice and Citizens Advice Scotland now being subject to the Freedom of Information Act. I can see why that has happened, but it makes Citizens Advice somewhat vulnerable. If it is subject to the Freedom of Information Act, there is the question of other powers in this area that were the responsibility of Consumer Focus under the Consumers, Estate Agents and Redress Act 2006, in particular Section 24 of that Act, based on previous powers that existed for Energywatch, which provided that Consumer Focus had pretty strong statutory powers to demand information from any company providing any good or service. Previously that power applied only to energy companies and to the Royal Mail, but it was generalised in that Act. Those powers were very effective, and were rarely explicitly used because the threat of doing so usually got you the information that you wanted.
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I should have declared my past chairmanship of Consumer Focus, I therefore know about these things—although I have no current interest in that area. It is important that if advice is to be a primary responsibility of Citizens Advice with no back-up, it should also have access to those Section 24 powers. I presume that in general terms, such powers will be included in the next order—which Jo Swinson’s letter implies is going to be laid beyond the Summer Recess—dealing with the general transfer of Consumer Focus’s advocacy functions to Citizens Advice. However, that will not come into effect until well into 2014; whereas, in effect, the advice service has already started and will be given legal basis by the passage of this order. Citizens Advice will therefore have no ability to use or threaten to use those powers in that interim period. I would therefore like confirmation that it will ultimately get the Section 24 powers, and I should like to know what it can do in the interim period. The powers have been a powerful lever that we in Consumer Focus used to find very useful. It is more difficult to give those powers to a
third-sector charity than to a statutory body. Nevertheless, in the course of proceedings on the Public Bodies Bill, we were assured that similar powers could be directed to third-sector bodies in this and other fields.
However, the current situation leaves Citizens Advice a little vulnerable, not only to the Freedom of Information Act as regards how it carries out its powers and deals with its new statutory responsibilities, but potentially to judicial review. That would, in many respects, be unfortunate for Citizens Advice, yet that would seem to be a logical conclusion from the transfer of statutory powers. It would be useful to know whether Citizens Advice, in the exercise of these powers, if not more widely, could be subject to judicial review.
There is an additional point in this area that relates to energy consumer advice. When Energywatch was wrapped into Consumer Focus, the individual advice service was split in two. Part of it went into Consumer Direct, which is dealt with in this order and will go to Citizens Advice with the rest of Consumer Direct services. However, complex and urgent problems were dealt with by a special unit of Consumer Focus, the Extra Help Unit, based in the offices of Consumer Focus Scotland. The unit dealt with complex issues, for example, when it was difficult to get a response from an energy company, and issues where there was an imminent threat of cut-off of gas or electricity. The unit often dealt with very vulnerable consumers. It is not clear where the unit is going to go. Will it be transferred to Citizens Advice or, because of its location, Citizens Advice Scotland? Or will it simply be subsumed in the powers? If there is a transfer, will that involve simply the powers, or is there a staff and resources transfer issue that would be covered by TUPE? An answer would be helpful.
Additionally, well over 10% of the issues that the Extra Help Unit dealt with were those of micro-businesses that were being threatened with their gas or electricity being cut off. You can imagine that that would be pretty urgent and potentially lethal for your business. I understand that Citizens Advice will not be dealing with businesses. If that is true, where does the responsibility for micro-businesses go to under the new set-up?
Those are complicated questions on which I would welcome clarification either today or in writing. However, I am in favour of the general terms of the transfer and in favour of the OFT retaining some supervisory function within that area. As to enforcement, the OFT retains some thin responsibility but most of the powers are to be devolved to the Trading Standards departments of local authorities. The explanatory document sets out the four main areas of regulation to which my noble friend Lord Borrie referred. It is not entirely clear as each has different terminology in relation to each of the current regulations where the role, previously with the OFT and now transferred to the CMA, will necessarily now lie. The CMA will retain the ability to be an enforcer in these and other areas. In other words, the noble Viscount referred to the fact that nobody knew whether to go to the OFT, trading standards or the various other bodies. That responsibility will still be split in relation to these and wider regulations. What is the relationship between the individual trading
standards, which will have the lead responsibility now, and what will be the CMA’s residual power as an enforcer? Is the distinction in relation to size, geographical spread, across local authority boundaries, or does it depend on the kind of issue?
I appreciate that some of this is not yet sorted out, and some of it may be sorted out by discussions on the National Trading Standards Board, the trading standards partnership or, in Scotland, the consumer protection net. However, these are all somewhat shadowy bodies with no statutory existence. Yet, they will have considerable responsibility deciding where priorities lie and what the allocation of resources will be, but they will not be responsible to Parliament in any way, except for the reporting functions to which my noble friend Lord Borrie referred, and they do not appear to be responsible to the CMA. Non-statutory bodies seem to be carrying out what were previously statutory responsibilities.
The National Trading Standards Board is a co-ordinating body for encouraging leadership, and it may decide priorities, but does it have a quality control oversight of trading standards within individual local authorities? In proceedings on the Enterprise and Regulatory Reform Bill, I opposed the deletion from the role of the CMA what had been the OFT’s general responsibility for consumer protection. Those powers will disappear entirely in the new set up unless yet another order is to come which will compensate for the removal of those general powers, or will that all now rest with Trading Standards and the co-ordinating bodies we are about to set up?
I declare an interest as an honorary vice-president of the Trading Standards Institute; I have great respect for Trading Standards. However, if they are to take on and improve the effectiveness of enforcement, as described by the Minister, in all of those areas that were previously at national level, and improve their activity and effectiveness at local level, they need to have the resources to carry that out. In recent years, under both Administrations, trading standards have been squeezed. They are a discretionary activity of local authorities to a large extent and they are certainly not ring-fenced in budgetary terms. Yet the need for consumers to have protection and for business to know what its responsibilities are has not diminished. The information that I have received—I mentioned this in the ERR Bill proceedings—is that because of the squeeze on Trading Standards resources, England, Scotland and Wales have lost about 13% of their funding in the past two years, but it started before that. They have also lost some 15% of staffing and as a result they are forced to focus on perhaps the larger and higher risk issues. It means that in total there has been a 20% fall in programmed scheduled visits and a 24% fall in total visits across England and Wales. The net result of this has been a 29% fall in prosecutions. That is not because the problem is disappearing and resources are being better deployed. It is because the total amount of resources has diminished. Now that Trading Standards are to get additional responsibilities handed down from previous OFT responsibilities there is not much indication of how many additional resources, relative to OFT spend, are going to go to trading standards. Some of them will be funnelled via the TSI into the
new co-ordinating set-up but that does not amount to the total additional resources that are going to be needed within Trading Standards.
Perhaps this goes back to the criticism, to which the Delegated Legislation Committee drew attention, over the inadequacy of the explanatory document about the economics of this. There may be an improvement in effectiveness. To some extent that will happen but this part of the order is rated in the letter to which the Minister referred, from his colleague Jo Swinson, as having a net present value of £3.2 million. There is also a rather amorphous reference to improved leadership and so forth. I accept that some of this may occur but at best it is difficult to see how that will amount to a net present value of £3.2 million to the economy as a whole. Even if it gets near that, the benefit in net present value terms is somewhat thin.
There are uncertainties and lack of clarity about the role of the CMA as it will be in relation to Trading Standards. Some of the OFT functions, such as on scams and voluntary codes of practice, are not quantified or directed in this legislative instrument, and this itself will require resources. Most consumer organisations and the OFT wanted to give more resources. Given this resourcing uncertainty, I query whether the effectiveness and economic value of the transfer of these functions down the line to Trading Standards and the shadowy bodies to which I refer is going to deliver a better service.
I still have serious doubts about that part of the order. I hope that the Minister may be in correspondence when we consider this in the Chamber and will be able to reassure me. I have no principled opposition to this. I just think that the total picture does not add up, and does not help consumers and businesses enough to be clear about where responsibility lies. It is not clear about how enforcement will be targeted and be more effective than the previous set-up. With those comments, I would be interested the Minister’s response.