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(10 years, 1 month ago)
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Arrangement of Business
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The Deputy Chairman of Committees (Lord Bichard)
Welcome to the Grand Committee. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Social Security (Jobseeker’s Allowance and Employment and Support Allowance) (Waiting Days) Amendment Regulations 2014
(10 years, 1 month ago)
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Lord Kirkwood of Kirkhope
To move that the Grand Committee takes note of the Social Security (Jobseeker’s Allowance and Employment and Support Allowance) (Waiting Days) Amendment Regulations 2014. (SI 2014/2309).
Relevant documents: 9th Report from the Secondary Legislation Scrutiny Committee
Lord Kirkwood of Kirkhope (LD)
My Lords, I am substantially discomfited by the fact that sitting on my right-hand side is the chairman of the Delegated Powers and Regulatory Reform Committee. Next week she is chairing a seminar on how we deal with these orders, and I hope that she does not mark me down too hard.
These regulations are not new to us, and we as a Grand Committee have been considerably assisted in their consideration by the work done, as always, by the scrutiny committee, which identified—rightly, I think—that these amendment regulations raise issues of policy interest to the House. I am also indebted to the Social Security Advisory Committee, which—again rightly, in my view—engaged in a formal consultation on these orders. I think that that was the right thing to do. I am sure that, like me, colleagues have been able to read the orders carefully; they repay careful study, and a consultation was proper.
In passing, I would say that it is disappointing that we got advance notice of these regulations in 2013—I think it was in the Budget, or perhaps the Autumn Statement—and that was repeated in the Budget Statement 2014, but these regulations required some consultation if the policymaking was going to be done carefully, and there was a whole fallow year following their announcement with a flourish—and I am getting more and more nervous about social security announcements that are made with a flourish in Budgets. So, that time in the year 2013-14 could have been used to look at some of these things.
The evidence that the SSAC has uncovered is invaluable in the consideration of this policy. Indeed, as the Explanatory Memorandum says, the estimated saving is some £50 million in fiscal year 2015-16, and the savings will diminish thereafter. I guess that that is because we approach the introduction of universal credit in 2017-18, and I shall come back later to that important moment. The Explanatory Memorandum mentions the calculations done by the department, and these are useful for reference. Paragraph 3.10 of the SSAC report says:
“The … analysis indicates that for 2015/16, the number of new claimants likely to be most at risk of suffering financial hardship are around 245,000 in JSA and 35,000 in ESA … The estimated average loss of benefit to each claimant from this policy change is £40 for JSA claimants and £50 for ESA claimants”.
That is very helpful to know. The point that I want to raise more than anything else is the hardship that will be experienced by that client group—the 35,000 people on ESA and the 245,000 on JSA. That is the point of discussing this here today.
I am opposed to these changes. If I thought I had any chance of getting a Division that would successfully annul them, I would have tried that. I am seriously considering doing so, depending on what support I can garner from colleagues if restrictions such as waiting days are put on universal credit as we approach 2017. These are savings dressed up. They are pretty mean-spirited and hit the most vulnerable. They again concentrate cuts on the working-age population and take no account whatever of the environment of the past four or five years. A policy of this kind, if it were to be applied eventually to universal credit, would be much worse.
I therefore support the SSAC’s recommendations and need to continue the analysis. I understand and am grateful for the extra work that the department has put in as a result of the request from the Social Security Advisory Committee. The case for exempting ESA was strongly made but resisted by the Government, which is a shame. The case that the SSAC made for promoting short-term benefit advances as a way of trying to alleviate some of the hardship was discarded in a rather offhand way by the Government. Members of the ESA and JSA client group who are most at risk in 2015 and beyond will have to rely on STBAs because they do not have any other options to plug gaps in benefit. I clearly support the idea from the SSAC that communications must be absolutely crystal clear regarding what is happening to the client group so that they can understand the position in advance and get their claims in early. The recommendations of the committee were all well founded. I was pleased that the Government accepted some, but not all, of them.
I want to say a word about context because I get the impression that the department does not pay enough attention to the payment regime. The system of paying benefits to low-income households who operate on a weekly or fortnightly cash basis underestimates problem that some of these delays and reductions will bring. I remember the good old days before 1998, as will other colleagues, when benefits were actually paid weekly and everyone knew where they were. That changed in 2009 to payments fortnightly in arrears, and in 2018 we are facing the cliff edge of universal credit paid monthly in arrears. I do not think that the department fully appreciates the significance of the change in the method of payment. I point out the obvious fact that Social Fund crisis loans are no longer available and there is an uncertain labour market in which people are much more quickly churning in and out of benefits and work.
Yesterday I was made aware of a publication by the Institute for Fiscal Studies which reminded me that over the past four years we have been taking, and will take, £20,000 million out of benefit expenditure in every year of this Parliament. That is a huge amount and the vast majority is being focused on working-age benefits. In a wider context, although I might be out of order in terms of this debate, we need to think clearly about how the cuts are shared across any future attempts to reduce social security spending, 50% of which is now spent on the retired cohort of our population.
I want to say a brief word about the eight vulnerable groups who have been identified. I am sure that the categories are not new to any of us. They include 18 to 24 year-olds, the homeless, disabled people and prisoners—who are of particular interest to me as a non-executive director of the Wise Group. We have a Routes Out of Prison programme which tries to mitigate the fact that we send prisoners out on a Thursday morning from Barlinnie prison with £46 in their hands and next to no other support. Issues such as those contained in the regulations will make their lives and futures worse. Concerns about the vulnerable groups identified by the SSAC are all well founded, and we need to watch the impact of these regulations on these eight categories very carefully.
I want to make two other points. The so-called list of investments that we now have access to as a result of this £50 million saving being recycled was first adverted to by the Chancellor as part of the 2013 spending review. They are things like upfront work search, English language requirements, weekly work search reviews and annual verification. I may be missing something, but I thought all this happened anyway. If it has not been happening since 2013, I will be disappointed. I do not see that we can demonstrate clearly that these savings are going to make any difference whatever, which folds back to the point that I made at the very beginning—that this is actually a dressed-up saving. It is the departmental expenditure limit that will get the benefit of this £50 million and next to nothing else. This is why I want to press the Minister about evaluation. There is an undertaking here in the Explanatory Memorandum which talks about looking at the results of these new investments and how beneficial they will be. I am very sceptical about that and would like to hear a little more about it.
The SSAC report says that the statement in the Explanatory Memorandum that there was likely to be “no impact” on business or charities is “implausible”. It is being very polite. Anybody who knows anything about the 245,000 and 35,000 people in the client groups that we are dealing with realises exactly how important charities are to people in that situation. I do not think that the department is living in the real world. It is a laughable statement. This will lead to payday loans and all that they bring, which is potentially deeply regrettable.
With the funding available to local authorities also being reduced, these regulations are bound to increase hardship. It may not involve millions of people, but it will affect those whom it does affect severely. I want the Government, in evaluating how these regulations are implemented, to have very careful regard to the consequences and the effects on these families. I want them in particular to reflect very carefully about bringing forward similar regulations when it comes to introducing universal credit later in the next Parliament. I beg to move.
Baroness Lister of Burtersett (Lab)
My Lords, I thank the noble Lord, Lord Kirkwood of Kirkhope, for initiating this take note debate on a very important subject. I apologise if I repeat any of the points that he made, but they bear repetition because there has not been sufficient publicity about the implications of these important regulations. The SSAC, as we have heard, is very critical of them, especially of the lack of robust analysis of the costs and benefits. The impact assessment that the Government have produced in response is certainly an improvement. Whether it constitutes that robust analysis is another matter, but it does at least give us more information on those who are likely to be affected. I accept that it does give some credence to the original—unevidenced—claim that many affected would be,
“coming to benefits from relatively well paid jobs”,
as the lowest paid are more likely to have linked claims and therefore not be affected. Nevertheless, nearly two-fifths of JSA and three-fifths of ESA unlinked claims were from those earning less than £5,200.
Baroness Thomas of Winchester (LD)
My Lords, I too am grateful to my noble friend Lord Kirkwood for giving us a chance to talk about these regulations, and I really do not think he needs any lessons from my seminar about how to do these things. He is an old hand at regulations of all kinds, particularly DWP ones. I fear that I shall echo much of what he and the noble Baroness, Lady Lister, have said, although I do have a few further points to add.
As we have heard, the main recommendation from the SSAC is that a robust analysis of the costs and benefits should be undertaken and published before the regulations are proceeded with and ESA claimants should be taken out of the new rule. I echo the noble Baroness, Lady Lister, first by pointing out that although the Government say that they have complied with the first recommendation, it is not what any of us would call robust. Their main contention is that the numbers adversely affected by this change are comparatively small, although they do admit that it is not possible to establish the numbers or levels of hardship for specific vulnerable groups—for example, those who are homeless or have mental health problems. I shall come back to that in a moment. They also admit that there will be financial difficulties for these groups. As we know, if 82% of JSA claimants and 74% of ESA claimants are not on HB and 50% of JSA claimants are paid monthly, this still leaves a large number of claimants who are receiving housing benefit, possibly passported from JSA, and who are not paid monthly. These people are often on low incomes, paid weekly and have no savings. For them an increase in waiting days will make a significant difference with knock-on effects elsewhere in the welfare system, and I do not think we hear nearly enough about knock-on effects.
I am particularly concerned about those on ESA, even though this will only be 40% of ESA claimants. The Government’s reason for not excluding them from this change in the waiting days is that they say there is no evidence that those on ESA are at a greater risk of financial hardship than those on JSA and they do not want to encourage claimants to try to move from JSA to ESA. This surely will impact disproportionately on many disabled people, who are less likely to be claiming ESA through having left work and thus will not have a final salary to fall back on. In any case, disabled people take longer to secure work and move off ESA. They are also likely to be on fixed budgets and have few savings, so for them this change simply means a loss of benefit. Their only comfort is that we are told they can apply for this short-term benefit advance. However, I am absolutely horrified by the Government’s statement that disabled people could use their disability living allowance, if they receive it, during a temporary disruption to other income. This tightens the screws still further on disabled people and should not have been put forward. DLA or PIP is designed to help living with a disability, not day-to-day living expenses.
Here I want to mention another reason the department ought to be very careful before implementing this particular policy as it applies to ESA claimants. It was on the news at lunchtime that there is evidence that the DWP has carried out 60 reviews into suicides linked to benefit cuts in the past three years. This very serious matter has been uncovered by John Pring of the Disability News Service and I think we ought to hear more about this in the coming weeks. As for this amazing statement in the original impact assessment that changing from three to seven waiting days will not impact on local authorities or charities, I want to reiterate what the noble Baroness said about food banks. I suppose the Government tick a box without really thinking about it when they say that this will not impact on charities, because nothing could be further from the truth. Of course more people will turn to charities such as the Salvation Army.
Altogether I find the Government’s rationale for this change pretty thin. They say that they want to encourage claimants to look harder for work but claimants have to do this anyway. They do not appear to know how this change will work with UC or how it will impact on housing benefit. We are told that the savings generated by this change will be ploughed back into labour market measures to improve the English language skills of claimants. That is one thing I very much approve of. My noble friend said that I never say anything nice to him on these sorts of occasions. Well, here is one tiny crumb of comfort. If the money is spent improving free English language teaching, I shall be very pleased. The other thing it is supposed to do is to provide more resources to support lone parents to return to employment. I echo the point made by the noble Baroness that we would like to hear more detail about these measures.
It may be very tempting for the Government to say that their aim with this policy is further to weaken the culture of dependency because that is a popular message—we have to be honest about that. However, they must make sure that in so doing they do not cause considerable hardship to many thousands of people, with knock-on effects they have not even tried to factor in. The party opposite flirted with this policy some years ago but changed its mind and did not implement it in the end. I hope that the same will be true of this policy.
Lord McAvoy (Lab)
My Lords, I, too, thank and congratulate the noble Lord, Lord Kirkwood of Kirkhope, on moving this Motion which allows us to elaborate further on this pernicious policy. Like many others, I am still waiting for the rationale behind what the noble Lord described as a mean policy. I do not get the stated—or, rather, not yet stated—rationale behind it.
I would like to repeat some of the comments made by the Secondary Legislation Scrutiny Committee. It stated:
“DWP estimates that this change will generate savings of approximately £50 million in 2015-16, although these will decrease in subsequent years as Universal Credit is rolled out”.
Can the Minister say whether there has been any change in that estimate? If that is the case, I would like to hear what it is. The Secondary Legislation Scrutiny Committee also says:
“DWP states that these savings will be invested in new measures to support people into work”.
Therefore, work must have been done on allocating money to these new measures to support people into work. I would like the Minister to indicate what new measures are planned and their estimated benefits.
The Social Security Advisory Committee has issued a report on this measure, which, again, has been referred to. The Secondary Legislation Scrutiny Committee states:
“An Impact Assessment is now attached to the instrument which indicates that approximately 70% of JSA claimants and 40% of ESA claimants will serve waiting days ... reducing the value of their first benefit payment by an average of £40 for JSA claimants and £50 for ESA claimants”.
I fully understand why the noble Lord, Lord Kirkwood, described this measure as mean. There is no doubt that the country faces a difficult situation caused by the downturn initiated in America in 2008 to 2010 and that difficult decisions would have to be made by whoever was in authority. The noble Baroness, Lady Thomas of Winchester, mentioned the Labour Party. We have repeatedly expressed concern about how the administration of universal credit will impact on those on low incomes. The reform represents a significant change in the rhythm of social security payments for a group for whom this is a main source of income and whose well-being will be profoundly affected by any delays or problems experienced in receiving it.
My noble friend Lady Lister of Burtersett and the noble Baroness, Lady Thomas of Winchester, both referred to the role played by food banks and charities. Like many people, I am outraged that food banks have had to be established to deal with the society that we live in. This measure has not taken into account the dire straits that some people will find themselves in when trying to deal with it. The Labour Party convened a universal credit liaison committee which reported in June 2014 and made several recommendations on the payment of universal credit which we believe the Social Security Advisory Committee should have considered, including one on the scope of the regulations.
I ask the Minister whether consideration was given to making the first payment of universal credit earlier. If that was the case, it should be widely publicised. The cost of allowing claimants that choice of payment date, as with direct debit payments, should also be looked at. Has that happened or was any consideration given to it? Did the Government ever seriously consider implementing it?
In order to mitigate any hardship that may arise from the recommended move to a seven-day waiting period, we asked that sufficient attention should be drawn to the recourse available to claimants through short-term benefit advances. Noble colleagues have mentioned this aspect. In fact, the Social Security Advisory Committee itself recommended that the DWP should:
“Strengthen the existing process for highlighting the availability of STBAs and ensure that they are proactively and consistently signposted. In particular, it will be important to ensure that staff (through training and appropriately worded scripts) are encouraged to identify potential hardship and, where it has been identified, explain the process to the claimant. It is also important that the Department ensures that all supporting information channels, such as GOV.UK, highlight the existence of STBAs”.
Will the Minister give the Government’s response to that view and say whether they have given any consideration to implementing it?
The claimant should be made fully aware of budgeting advances and more discretion should be shown in order to mitigate any hardship that may arise from the recommended move. Attention should be drawn to the existence of budgeting advances and, in certain circumstances, we hope that discretion is given to advisers to waive the eligibility criteria whereby claimants need to have been in receipt of benefits for a period of six months in order to apply for an advance. I ask the Minister to respond and indicate what consideration was given to the measures that I have outlined or other measures from a variety of sources. The Minister has an overriding duty to explain the rationale behind the measure and go into detail about its implementation.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
I thank noble Lords for their many helpful contributions to the debate. It is clear that this measure has generated a great deal of interest, not just within this House but outside among voluntary and public organisations, which have also presented their views to the Government. The principle behind this extension from three to seven waiting days is that benefits are not intended to provide financial support for very brief periods, for instance when someone is between jobs or during a short period of illness. This measure will generate savings of £125 million over five years. It is money that, as noble Lords have touched on, will be reinvested to help those most at risk of long-term welfare dependency. As noble Lords know, the measures will fund schemes including additional support for lone parents and improving literacy and numeracy skills.
To pick up the question from my noble friend Lady Thomas about any change in those estimates, they were based on departmental forecasts which themselves were based on OBR economic assumptions at the Autumn Statement 2013 and in Budget 2014 and there have not been any updates to this analysis since then, although we are, of course, awaiting another financial event quite shortly.
On the related question from my noble friend Lord Kirkwood and the noble Baroness, Lady Lister, about what and where these investments are, we are expanding on measures that are already in place. They will introduce more rigorous scrutiny on the hardest-to-help claimants. The English language provision is new and will ensure that claimants have the language skills for the workplace. Those methods should enable the claimants to enter the workplace sooner than they otherwise would, which means that they will be earning sooner and not receiving benefits.
Baroness Lister of Burtersett
Perhaps I may ask the noble Lord the question raised by SSAC. Is it likely that the people who are going to be adversely affected by this change will be the people who will be helped by these measures?
Lord Freud
Yes; I thought that I had made that clear—that the intention is to focus on the people with longer-term difficulties. So, yes, the intention is that it will be those people.
This measure means that many people who make a new claim for jobseeker’s allowance and ESA will see a reduction in their first benefit payment. However, we have measures in place through exemptions and the offer of advances and signposting advice to ensure that claimants who are most in need will continue to be protected.
I hope that I can pick up all the points that have been raised. On the point raised by my noble friends Lord Kirkwood and Lady Thomas on the exemption of ESA claimants, if there had been a differentiation between the two types of claimant there would have been a perverse incentive for people to self-certify sickness for a week and claim ESA rather than JSA in order to get an additional four days’ benefit. There is no evidence that ESA claimants are at greater risk of financial hardship than JSA claimants. Furthermore, to exempt ESA claimants to make that differentiation would be inconsistent with future proposals for universal credit, where our intention is that all ESA-type claimants will be placed in the all work-related requirements group and therefore subject to waiting days. Clearly, waiting days themselves have been a feature of ESA since its introduction in 2008. This measure has simply extended that existing provision for those who do not qualify for an exemption.
The point that my noble friend made about exempting vulnerable groups is clearly one into which we put a lot of consideration, particularly around care leavers, sufferers of domestic violence and ex-prisoners. Bluntly, they were exempted on grounds of practicability. It would have introduced an unworkable, three-tier system and these groups are already required to serve three waiting days, so the only other option would be a full exemption which would go beyond the scope of this change. Despite what my noble friend said about the UC provisions in this line, we are able to make an exemption for these groups in the UC-equivalent provisions. Perhaps that will leave my noble friend somewhat more relaxed about those.
Baroness Lister of Burtersett
I am sorry to intervene on the Minister. I was not asking about savings, because that is in the public sphere. My question was whether there was any information about people who come out of work in debt or arrears?
Lord Freud
I was coming on to that. The noble Baroness asked a series of questions. We do not currently have the information on the proportion of people coming on to benefit who are likely to be in arrears or debt. I am not aware of any published analysis that would allow us to estimate this quickly. All noble Lords who spoke raised the question of short-term advances. SSAC recommended that communications about them should be strengthened.
Lord Freud
A number of noble Lords raised the communications issue around short-term benefit advances. We have taken the recommendation of the committee and issued communications to all staff to improve staff awareness of benefit advances and to remind them of the circumstances in which an advance can be considered.
On the point made by the noble Baroness, Lady Lister, on the report on food banks, I was not at today’s press conference but no one takes the decision to use a food bank lightly. The factors driving food-bank use are many and complex, as today’s report recognises. The report said:
“The immediate income crisis that predominantly led to food bank use was often one incident in a complex life story, in which several other factors had combined to leave people vulnerable and less able to cope with dramatic changes”.
Baroness Lister of Burtersett
I agree that we are talking about very difficult lives here, but it is very clear from this research, which is not a huge study but it is from a number of different places using a number of different methodologies, that benefit delays were a very important factor. Given that, does the noble Lord not accept that this measure could well make it worse?
Lord Freud
My Lords, I would be the last person to say that the current benefits system was easy to navigate. One of the things that has been driving the reform that we are introducing, universal credit, is the production of an in-work and out-of-work benefit that is easy to navigate. I started researching this area in some depth in 2006 and the irony is that benefit delays under the existing, rather complicated system have actually been improving. That is why I revert to the point that this is a complicated matter, as is acknowledged in today’s report and in other reports. That is the only point I want to make.
There was a series of questions on universal credit and the noble Baroness raised the point about TUC concerns about the length of time claimants have to wait for payments under universal credit. Clearly we have an advances process built in, but probably more important is the system that is now developing of universal support delivered locally, which is designed to work in the local community, both with councils and with voluntary organisations, to bring the support that is specifically required by vulnerable people. The estimated saving from increasing the waiting days in universal credit is £200 million per annum once it is fully rolled out, but this figure will be reviewed and updated with the Autumn Statement. I have talked about exemptions within universal credit.
The noble Lord, Lord McAvoy, asked about our consideration of whether we add waiting days to the assessment period in universal credit or whether we have partial periods of universal credit. We spent a great deal of time considering that issue. Universal credit is an in-work and out-of-work benefit, paid on a monthly basis. That monthly basis is designed to help households to budget on a monthly income and eases the transition from and back into paid work. The one-month assessment period is therefore central to universal credit, and the waiting days in universal credit are days of non-entitlement. I need to remind noble Lords that because universal credit is an in-work and out-of-work benefit, one might not experience waiting days anything like the same number of times as, especially if one is moving from low-paid work to being out of work, one is likely to be consistently on universal credit. That is one of the safety features of universal credit in this regard.
With that I think I have dealt with all the questions raised today and thank my noble friend—
Lord McAvoy
I may have missed it, but I do not think I did. Does the Minister have any response to the point made by the Social Security Advisory Committee about short-term benefit advances?
Lord Freud
Yes, we have accepted the communications issue there and have already, on the basis of that recommendation, issued communications to our staff to improve awareness of the availability of short-term advances and remind them of the circumstances in which those advances can be considered.
As I say, I think I have dealt with everything. I thank my noble friend for the opportunity to discuss this important topic and to address all the concerns and matters that have been raised.
Jobseeker’s Allowance (18–21 Work Skills Pilot Scheme) Regulations 2014
(10 years, 1 month ago)
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Lord Freud
That the Grand Committee do consider the Jobseeker’s Allowance (18–21 Work Skills Pilot Scheme) Regulations 2014.
Relevant documents: 9th Report from the Joint Committee on Statutory Instruments and 12th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
These regulations were laid before the House on 13 October and I am satisfied that they are fully compatible with our obligations under the European Convention on Human Rights.
Recent labour market statistics show that youth unemployment is moving in the right direction. The most recent figures from last month show that young people—those between 18 and 24 years of age—saw the largest annual fall in unemployment since records began, of more than a quarter of a million since last year. Excluding those in full-time education, there are now 468,000 unemployed young people. This is down by nearly a third compared to last year and is fewer than just before the recession. Clearly, this news should be celebrated, but we will not be complacent. Compared with other countries in the OECD, we in the UK still have a higher proportion of young people who are not in employment, education or training—who are NEET—and despite the general upturn in the economy, this remains a stubborn issue. Even in past better economic times, on average some 7% to 9% of young people have struggled to find work, and this is not a situation which the Government are prepared to accept.
Since coming to power we have done much to address the issue. We have expanded the apprenticeships scheme and launched traineeships to support young people who are not yet ready to apply for an apprenticeship. We have worked with business to create more than 100,000 work experience placements for young people. We have cut the national insurance contributions that businesses pay for young employees, and we set up a Cabinet Office review of all policies funding our provision for 16 to 24 year-olds who are NEET. Outcomes from this review include opening up the Jobcentre Plus network to 16 and 17 year-olds so that they can receive support and guidance from jobcentre work coaches, and a new careers guidance system is planned for 16 year-olds to help them make the best possible decisions about their future. Also as a result of the review, the Chancellor announced in the 2013 Autumn Statement the intention, which was reaffirmed in the Deputy Prime Minister’s speech on 27 February last, for the launch of two pilots of support for young people aimed at addressing the skills and experience gap that is holding so many of them back from joining and progressing in the labour market.
We know that a young person is twice as likely to be NEET if they have not achieved a level 2 qualification in English or maths by the age of 18—that is 19% compared with 39%. Young people are much more likely to remain unemployed for longer. Some 45% of the young long-term unemployed have qualifications in English or maths below level 2 as against 20% of the population as a whole. Moreover, two-thirds of JSA claimants do not have level 2 qualifications in English or maths. We also know from employers that English or maths skills are critical in the workplace and are paramount to the recruitment practices of many. Findings from the Employer Skills Survey 2013 suggest that where young applicants were not considered to meet the requirements of the role, the main reasons cited were lack of skills and experience.
The aim of the two pilots, or “phases” as they are described in the statutory instrument, is to test new approaches to the delivery of support for young people who lack the English and maths skills or work-related experience and skills that employers demand. It is not the aim of the pilots to deter young people from making a claim for JSA or to make the claiming of JSA harder. Through these pilots, we want to give young people the tools that will serve them throughout their working lives.
Under phase 1, we will require new claimants of jobseeker’s allowance aged 18 to 21 who do not possess level 2 qualifications in English or maths—the equivalent of a GCSE grade A* to C—to undertake learning in one or both of these subjects for up to 16 hours per week for up to six months. We will test whether the use of mandation is effective in securing participation in the learning, compare the two methods of learning in terms of effectiveness and cost, and identify the impact of the learning on job outcomes and off-flow from benefit. Under phase 2, we will require all 18 to 21 year-olds who are still claiming jobseeker’s allowance after six months to undertake an appropriate skills or work-related activity, if they are not already doing so. Doing nothing will not be an option for them. We will test the impact of mandation on take-up of provision, off-flow rates from benefit, job outcomes and skill gain. We also seek to understand how the new process is received by claimants, work coaches and employers, and the net impact of piloting this approach.
Phase 1 will be delivered in jobcentres within the Mercia, Kent, the Black Country, Devon, Cornwall and Somerset districts. Implementation is planned to begin this month, with the last referrals to learning taking place towards the end of 2015. Phase 2 will be delivered in Kent jobcentres only. It will also begin this month but is expected to end in the autumn of 2015, as we do not require as many participants to provide robust evaluation.
We believe that the pilots will have a positive impact on the skills and experience levels of young people, improving their competitiveness in the labour market and enhancing their wage-earning potential in future years. It will also give us the opportunity to gain more evidence of what types of support work best for young people, thereby informing future decisions on our approach to helping those claimants who are furthest away from the labour market.
Lord German (LD)
My Lords, I am grateful to the Secondary Legislation Scrutiny Committee for drawing this matter to the attention of the Committee because it raises issues of public policy that are of some significance. As my noble friend has said, this policy seeks to deal with a difficult group of young people. It is an issue which has stubbornly refused to go away despite the many different approaches that have been taken to it. I must say that I agree with the definition of the problem, but I am not yet convinced that the solutions being proposed in these regulations are the right way to progress our knowledge, understanding and prescription for dealing with it.
At paragraph 7.4 of the Explanatory Memorandum the Government say that,
“there is no clear evidence of what methods would be most effective in improving the skills or enhancing the work experience of young unemployed people. For this reason, we wish to pilot the use of innovative approaches”.
I agree entirely with that, although there is a large body of research on the way in which these innovative approaches with young unemployed people can work. I must tell my noble friend that I am not convinced that what is proposed here will be successful—that is, the new approaches to tackle poor English and maths skills among 18 to 21 year-olds and the tests that my noble friend has described. The key word in all this is “innovation”. Innovation means something new, a new approach and doing things in a different way. The two approaches described in the regulations are a classroom-based activity and an online-based activity. They set out where the activities take place and what activities take place rather than the process of dealing with this very difficult group of young people.
Most of the academic research on this issue says that the two crucial issues you have to deal with are lack of self-esteem and lack of confidence. The early steps on the rungs of the ladder they have to climb to achieve qualifications are missing. The group of people we are talking about have probably failed at school. They have been absent a great deal and have not even sat some of the examinations at the end of their schooling. The big question is this: if these young people have failed at school, and school is mandatory, what will the innovative approach in these regulations and the pilot achieve?
Research on this issue and my practical experience indicate that you have to spend considerable time supporting these people outside the classroom environment in order to restore their self-esteem and confidence. To achieve an examination result, you need to improve their self-reliance, and self-reliance does not come simply from following a course or a training programme, no matter how it is constructed. Although the activities in the report of the Secondary Legislation Scrutiny Committee—the DWP was asked to provide a list of all the activities—such as webinars, group sessions, “Telekids”, learning groups and online chat rooms are very straightforward, they do not deal with the crucial problem of improving self-reliance and esteem, which requires personal support.
As a patron of a charity working with a large, modern high school where a large number of young people were failing in the way I have described, my experience is that taking them out of school activities and giving them lessons associated with the charity resulted in most of them gaining some GCSE qualifications and a portion of them eventually going on to further and higher education at the end of the two-year period. That was a big success story, but its success depended on the relationship with the trainers in the non-formalised activity. In order for this activity to work, it had to be different from activity undertaken in school. Therefore, I must ask my noble friend what is in these regulations that will convince me and other noble Lords that the approach is innovative and has not been tried before. What academic research has been taken into account in trying to understand how these problems are dealt with in our country?
My only other question is why this pilot is being undertaken in England alone. I suppose—this may presuppose what my noble friend will announce—that it is because the tools by which you might handle this, such as the training and formal education systems, are in the hands of devolved government. If you found an innovative approach that worked, the question would remain how you could undertake it in all parts of the United Kingdom. You would have to convince the devolved Administrations to work with it.
The relationship with the education, training, social and support sectors of our society are crucial to this. Can my noble friend tell us what level of activity there will be with local communities because that is necessary to creating the innovative changes that are crucial to resolving quite considerably this very stubborn problem?
Lord McAvoy (Lab)
My Lords, I am grateful to the Minister for his very full exposition of the regulations. Twice I have heard him say that the number of full-time students has been extracted from the figures. To start off, can he give us the figures for those in full-time education this year and the previous year, if he has them available? If not, would he write to me? Secondly, I would like to follow up on an aspect of what the noble Lord, Lord German, had to say. I think the Minister used the term “deselected” for students who do not come up to scratch on the two aspects of education. Could he explain why information technology is not included in the subjects in this pilot? It would seem almost essential these days, even for my generation, to be fully competent in information technology. I do not see that that would cause too many complications. I would like to find out more about why information technology is not included. I also do not know whether he can find a better word than “deselected”, which is a bit harsh. Maybe he just has to have a sensitive side.
With some justification, the Minister has indicated that the proportion of young people not in education, employment or training is significantly higher here than in other countries. As has been pointed out, alongside the NEET figures referred to by the Minister—where there has been a reduction—there has also been a dramatic growth in the number of young people we just do not know about, as my right honourable friend Stephen Timms pointed out in the other place. Taking account of these issues, the position is perhaps worse than the NEET figures suggest.
I am also interested in finding out what happened to the review authorised by the Cabinet Secretary in September last year, now over a year ago, which intended to look at the Government’s approach to youth unemployment in the United Kingdom. As my right honourable friend Stephen Timms also pointed out, there does not seem to be any indication anywhere in Parliament of what happened to that review. I am certainly looking for an explanation as to why it was not carried out.
The Minister talked about sanctions. It is becoming clear across Jobcentre Plus that many people have no idea why they have been issued with their sanction. An explanation really needs to be given whenever sanctions are introduced, if we are not going to destroy totally people’s morale and belief in themselves, as the noble Lord, Lord German, pointed out. We are going to totally destroy people who are lacking in self-belief by wiping them out in this manner. That was not deliberately put across by the Minister, but it is certainly the intention.
I would also like to see more positive indications. Folk will quite rightly ask, “What alternatives have you got?”. Stephen Timms has announced that a Labour Government would take unemployed 18 to 21 year-olds who have not been in employment for a year and who have not yet achieved a level 3 qualification off jobseeker’s allowance and instead place them on a new youth allowance that would be dependent on participation in training. I can see elements of that taken account of —I will not say “poached”—in the proposals for these pilots. The proposal was, rightly, that the amount of allowance would be based on parental income on a similar basis to that used for assessing student maintenance. Positive suggestions have been made by Her Majesty’s Opposition but the concentration here is on the regulation put forward by the Minister.
I have no further questions other than about the number of full-time students; what considerations were taken into account before information technology was disqualified from being included in the exams; and, finally, what happened to the review which the Cabinet Secretary was supposed to carry out. I would not like to think we have armchair or sofa government at No. 10, so there must be a reason why that review was not carried out.
Lord Freud
I thank noble Lords for those two contributions. There is a consensus here that we need to do everything we can to reduce unemployment in young people, increase their opportunity for sustained employment and get their earnings to the maximum possible level. One of the key elements underneath the academic research—most dramatically that undertaken by Professor Wolf—is that English and maths, at the levels required by employers, are at the heart of successful vocational education. That is exactly what this pilot is designed to look at.
I remind noble Lords that this pilot is about whether we can make something work which is very difficult to achieve. We are trying to find evidence of whether systematically mandating young adults to blended or online learning works, and we need a randomised control trial to provide an evidence base to determine whether that is the way to go. If my noble friend will accept the innovation here, it is about finding out what actually works. There have been various tests abroad—in California and Chicago—of whether this kind of model works for people who have not been able to get these skills or qualifications through the educational process. There is sound evidence elsewhere and some academic research so it really is worth testing the proposition. We clearly need the pilot to find out the most cost-effective and best method of delivery for learning and to ensure that the claimants are engaged and supported to complete their learning aim. The last thing we want to do is roll out, on a national basis, something for which we have not established the costs and benefits.
The question from my noble friend Lord German was: how on earth will six months of this kind of activity succeed where 11 years of compulsory education has failed? The reason is that the form of learning is different; it is more flexible, more attractive, focused on work and largely online in both the different types—the blended and the pure online. The providers involved will address learners’ needs, such as a lack of confidence, through their training. They are registered further education providers with experience of working with these types of learners.
The other question asked by my noble friend was: why is this taking place in England alone? He answered his own question with far greater precision than I ever could. As he knows, skills is a devolved matter and any pilot activity in a devolved Administration would require consent from the respective Governments. We will, of course, be sharing our findings on these particular pilots with these Governments to inform their own policies in this area.
I was asked by the noble Lord, Lord McAvoy, about the number of people in full-time education who are looking for work. The number currently unemployed is 737,000 of whom 489,000 are not in full-time education, so the number of people looking for work who are also full-time students—I wish I could do sums in my head—is 248,000. This is really taxing my mathematical competence without a calculator so I will send the noble Lord the equivalent figure from last year before I collapse in a heap.
Lord Freud
I know the noble Lord would enjoy that more than anything but rather than do that let me go on to talk about the Heywood review, which he admired so much in public for which we are very grateful. In addition to these pilots there is also the 16 to 17 year-olds’ NEET initiative by the DWP in partnership with local authorities which provides personalised job advice and support through Jobcentre Plus. In the Autumn Statement the Chancellor announced a further range of pilots around changes to benefit rules surrounding traineeships, and in February the Deputy Prime Minister announced changes to careers advice and a new UCAS-style system for 16 year-olds. I can assure the noble Lord that there will be further announcements in due course about additional support for young people. I know that he will claim that they were all ideas generated by his own party but I think he is stretching credulity with that claim.
On the question of why information technology is not included, it is almost a logical impossibility, if we are testing online capability with these tests, to get English and maths learning over. It is a completely different proposition to look at online proficiency. It presupposes online proficiency, which is what we understand to be the most important thing, but English and maths are important. We may have to have a look at IT skills as well, as I suspect the noble Lord is suggesting, but that is not what this pilot is about. However, I take his point under advisement.
I am infuriated that I have just been given the figures but no sums have been done, so some of my team are as mathematically challenged as I am. No, I have been given the calculations too: I can confirm the figure of 248,000 in the three months to September 2014, which was down 62,000 over the year. I think that that has addressed all the issues raised, and I commend the regulations to the Grand Committee.
Pensions Act 2014 (Consequential Amendments) (Units of Additional Pension) Order 2014
(10 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Bourne of Aberystwyth
That the Grand Committee do consider the Pensions Act 2014 (Consequential Amendments) (Units of Additional Pension) Order 2014.
Relevant documents: 9th Report from the Joint Committee on Statutory Instruments
Lord Bourne of Aberystwyth (Con)
My Lords, as both the Social Security Class 3A Contributions (Units of Additional Pension) Regulations 2014 and the Pensions Act 2014 (Consequential Amendments) (Units of Additional Pension) Order 2014, as they are snappily called, deal with class 3A contributions, it seems sensible that they should be debated together. I can confirm that in my view these statutory instruments are compatible with the European Convention on Human Rights.
I shall begin with the regulations. The Pensions Act 2014 introduced a new class of voluntary national insurance contributions called class 3A. These new voluntary contributions are aimed at existing pensioners and people who reach state pension age before the introduction of new state pension on 6 April 2016, and who have an entitlement to a UK state pension. It will allow them to make class 3A contributions in return for units of additional state pension, which will increase their weekly state pension. We have called this scheme as a whole “state pension top-up”.
The regulations set out the pricing of class 3A contributions. They specify the contribution rates for class 3A and the maximum number of units of additional state pension that a person may obtain. The contribution rate for state pension top-up will be set at the specific amount that each age group will need to pay in order to obtain £1 per week of additional state pension. For example, it would cost a 65 year-old £890 to gain £1 per week of additional state pension, whereas for a 70 year-old the cost would be £779.
The scheme will be open for 18 months between 12 October 2015 and 5 April 2017. It is the intention that the scheme will open on the same day in both Great Britain and Northern Ireland. However, the scheme will not be commenced in Northern Ireland until the legislation necessary to set the amount that a person will receive in return for their contribution is in place. That is because this is a devolved issue, but we anticipate that that legislation will be in place. The intention is that the extra amount of additional state pension will be subject to an overall cap of £25 a week. As the extra pension obtained will be additional state pension, it will be uprated by the consumer prices index and be inheritable in the same way as SERPS. People will also be able to defer it, in line with existing rules.
These affirmative regulations have been made jointly, as HMRC will handle applications and collect payments for Class 3A contributions while the Department for Work and Pensions will administer and pay the extra amount of additional state pension. The intention is to deliver these changes as far as possible within the existing national insurance and benefit framework so as to keep administrative costs to a minimum.
We believe that state pension top-up will be particularly helpful for groups who have little or no additional state pension—for example, women and the self-employed whose social and economic contributions were not captured in SERPS and not fully reflected in the state second pension. We have conducted two online polls to gauge interest in state pension top-up. On the basis of the first poll, which we conducted in June of last year, we estimated that around 140,000 people would take up the scheme. The second poll was carried out in February of this year and suggested interest in state pension top-up had increased to an estimated 265,000 people who would take up the scheme. We gave more detail in the second poll, which demonstrates the power of advertising. This scheme will provide people with an opportunity to boost their state pension income in a secure, inflation-proof way, with the added advantage that it provides survivor benefits. However, people will need to consider whether state pension top-up is the best option for them.
I should also point out that existing class 3 voluntary national insurance contributions, which allow people to cover gaps in their contribution record for basic state pension, will remain unaffected by this measure. The DWP and HMRC will put in place administrative arrangements to ensure that individuals applying to make new class 3A contributions are made aware that they should also check their eligibility to make class 3 contributions. I should stress that class 3A contributions will be actuarially fair and, as a result, will cost more than the heavily discounted class 3 national insurance contributions. As an example of this, in 2014-15 a person paying £723 in class 3 contributions would obtain £3.77 per week in basic state pension. On this basis a person can effectively recoup their money within four years of reaching state pension age. A different approach was required, and has been taken, for class 3A contributions to ensure that the arrangements do not become a burden for today’s national insurance contributors—hence our decision to base class 3A on actuarially fair rates, as advised by the Government Actuary. In keeping with this, the cost will be adjusted to reflect the age of the pensioner at the time they make class 3A contributions, as I pointed out in my earlier example.
I now turn to the order. We did not want people to take up class 3A contributions only to have their newly acquired additional pension clawed back by rules designed for other parts of additional pension policy. To this end, the order amends primary legislation to ensure that a person’s state pension or disablement pension entitlement is not reduced by obtaining or inheriting units of additional pension acquired from class 3A contributions. The order also applies the existing rules on inherited SERPS to the newly acquired additional state pension. This means that people will be able to inherit the class 3A top-up in the same way as they can inherit SERPS—up to 100% if the deceased spouse or civil partner reached state pension age before October 2002, tapering down to 50% minimum if they reached state pension age since October 2010.
In closing, I reiterate that state pension top-up is an entirely voluntary scheme. It will provide people with a one-off opportunity to boost their state pension with a secure, index-linked income for life, ahead of the introduction of the new state pension. I reiterate that it is actuarially fair. I would also like to take this opportunity to thank the Secondary Legislation Scrutiny Committee for its earlier consideration and analysis of these regulations and order. We have taken on board its comments in relation to the Northern Ireland situation. I seek your approval of the regulations and order, and commend them to the Committee.
Lord McAvoy (Lab)
My Lords, I thank the Minister for his very full exposition of the regulations. I welcome him to what I think is his first appearance as a DWP Minister. He is very welcome to join this club of aficionados. I am sure that his colleague, the noble Lord, Lord Freud, has given him a fair idea of what to expect.
These regulations are broadly uncontroversial and there is no difficulty in accepting them, but I thought that while I was here I would ask some questions that arise. We welcome the fact that the Government have undertaken more research, as we asked for collectively in Committee on the Bill. However, the noble Lord, Lord Freud, said that the Government would,
“look to consider qualitative research to find out what sort of barriers there may be to taking up class 3A contributions”.—[Official Report, 13/1/14; col. GC19.]
It is not clear to me—or, I think, to others—how the research undertaken is qualitative in this sense. It seems to follow the previous research and to gauge only the level of interest. If the Government have undertaken that qualitative research, would the Minister share its results and tell us what he thinks the barriers are to people taking up class 3A NICs?
There is also the question that was raised in Committee by my noble friend Lord Browne of Ladyton about winners and losers. The only factor that will be taken into account in pricing a class 3A contribution will be age. No account will be taken of any regional or occupational differences in life expectancy. Have the Government done any work on the likely distributional effects of the scheme? Given that the scheme is actuarially fair in pricing, and the proposal is that over time the policy will be broadly cost-neutral, as far as the Government have said, if some people are getting a good deal, is it the case that others must be losing out? Presumably, those who lose out will be those with shorter than average lives, but have the Government done more work on this? Who do they think the winners and losers will be?
In addition, we also asked in Committee—I know that the Minister was not involved but I assure him that we did so—for a proper estimate of the number of people who may take up the offer, based on the latest research. The Government now estimate that around 265,000 people may take it up. The Minister does not need to answer because he has indicated that that is the case.
Will advice be provided—and if so, what kind—to ensure that people can make an informed decision on whether making class 3A contributions is the best option for them? There are significant considerations for individuals, such as their life expectancy, that may be significantly affected by where they live in the United Kingdom, by whether they are married or in a civil partnership or likely to be so, and by any other income or savings they may have.
When the Bill was in another place, the then Minister said that the Government would,
“put in place administrative arrangements to ensure that individuals who apply to pay class 3A contributions are made aware that they should first check their eligibility to pay class 3 contributions”.—[Official Report, Commons, 17/3/14; col. 578.]
How in practice will that be put in place? In its recent briefing, the Pensions Advisory Service said that this is complex and many people will not know whether it is worth paying voluntary NICs until the DWP can provide a single-tier pension statement. Can the Minister give us a response to that?
I know that there are a number of questions here but pensions are quite important to a lot of people, and it is essential that we take the opportunity in this House to clarify things. The Government have mentioned a cooling-off period of 90 elapsed days during which people can change their mind. How have the Government arrived at that number, and how will that interact with the guidance—or the lack of it?
I appreciate that I have put a number of questions whose answers might be complex and detailed. While I hope the Minister is in a position to answer them today, it is certainly acceptable to receive a reply in writing.
Lord Bourne of Aberystwyth
I thank the noble Lord, Lord McAvoy, for his comments and his kind introduction to the aficionados’ club. I look forward to discussing these issues with him over the months and years ahead—with us in Government and his party in Opposition, I trust. I am very grateful also for his general support for these regulations and the order. I will try to deal with the issues that he has quite reasonably raised.
The first related to the barriers to class 3 contributions and who was likely to take up these opportunities. As he rightly acknowledged, I gave the figure of 265,000. What research and evidence we have is in general terms, but it seems to be more attractive to women who have had career breaks and the self-employed who have not contributed to SERPS and a second state pension. He is also right about it being actuarially fair and cost-neutral.
The noble Lord talks about there being winners and losers, but that is not how it is seen by either potential beneficiaries or the Department for Work and Pensions. This is an entirely voluntary scheme to help people who have taken advice. We will stress, both on the website and on a hotline service that is going to be available in Great Britain and Northern Ireland, that people should take advice. Every situation is going to be different. He is right to suggest that it would not be so attractive to people who are not married or in a civil partnership or to people with a lower life expectancy; that is true. Online there will also be—my noble friend Lord Freud would benefit from this—an instant calculation of how much is payable by a person at a given age. The advice that we will be giving to people taking up class 3A contributions will be to check their eligibility for class 3 contributions to see if it is right for them.
Lastly, in answer to his question about why the cooling-off period is 90 days, I think that is a common period. If I am wrong on that, I will write to him. I do not think there is any particular science to it but it is standard practice in these matters to have a 90-day period, and I think that is fair. With those comments, I hope that I have dealt with the questions that the noble Lord raised. I thank him once again for his contribution and support, and I commend these regulations and the order to the House.
Social Security Class 3A Contributions (Units of Additional Pension) Regulations 2014
(10 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Bourne of Aberystwyth
That the Grand Committee do consider the Social Security Class 3A Contributions (Units of Additional Pension) Regulations 2014.
Relevant Document: 9th Report from the Joint Committee on Statutory Instruments
Representation of the People (Scotland) (Amendment No. 2) Regulations 2014
(10 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Wallace of Saltaire
That the Grand Committee do consider the Representation of the People (Scotland) (Amendment No. 2) Regulations 2014.
Relevant document: 9th Report from the Joint Committee on Statutory Instruments
Lord Wallace of Saltaire (LD)
My Lords, I will speak also to the Electoral Registration Pilot Scheme Order 2014 and the Representation of the People (England and Wales) (Amendment No. 2) Regulations 2014.
The Committee will be aware that individual electoral registration was successfully introduced on 10 June in England and Wales and on 19 September in Scotland. For the first time ever, people in Great Britain can apply online to register to vote. To date, some 67% of the 3 million people who have applied under IER have done so online. The draft instruments before the Committee today will make some further refinements designed to improve the operation of IER.
As noble Lords will remember, this is one of a long series of statutory instruments in this process. The process is being taken through with considerable care. Our aim is to ensure that the largest possible number are registered as we make the transition and that the integrity of the register is maintained as we do so. So far, the process has gone well. The matching process has been more successful than we expected, but we are concerned to maximise the number all the way through and we will be maintaining our efforts until the next election and beyond.
The Electoral Registration Pilot Scheme Order 2014 will establish a pilot scheme, enabling information about entries in electoral registers in 24 areas in England, Wales and Scotland to be compared with information held by the Secretary of State for Transport about individuals’ driving records and vehicle registration documents. The current IER system involves matching data against DWP records, and we are keen to see if there are other public data sets that could be used as well to increase the completeness of the electoral register. The order will require participating EROs to disclose their registers to be matched, including the use of the IER digital service, against name, address and, where held, date of birth information to be provided by the Department for Transport and the Department for Work and Pensions.
The Committee may recall noble Lords’ support for using DVLA data during the passage of the Electoral Registration and Administration Act, and will be pleased to see this practical scheme to pilot the use of this data. In 2011 a small-scale pilot indicated that using DVLA data, in addition to the match with DWP data, might increase the confirmation rate by a further 10%. The pilot scheme established by this order will test whether DVLA data will indeed add significantly to the confirmation match rate. The scheme will also allow for the piloting of data matching using DVLA data to identify potentially eligible individuals who are not currently registered. The pilot scheme will end on 30 June 2015.
I have heard, anecdotally, that people—particularly young men—who move very frequently do not on the whole bother to inform the state agencies with which they interact of their new address, including not reregistering with doctors. However, we are told that they do ensure that their driving licence is up to date and the right address is on it, so the DVLA data may help us in teasing out one of the under-registered groups in the population: young, unmarried men living in rented accommodation.
The Representation of the People (Scotland) (Amendment No. 2) Regulations 2014 and the Representation of the People (England and Wales) (Amendment No.2) Regulations 2014 will enable Crown servants and British Council employees living abroad to register online. The current electoral registration process for Crown servants and British Council employees relies on a paper-based declaration sent via the individual’s organisation, as well as an application to register. This means that these individuals cannot currently apply wholly online. The changes set out in the draft regulations enable them to do so. The figures that I have already given showing the high percentage of people who have registered online in recent months suggest that it would be very advantageous to enable them to do so. The regulations also replace the requirement to send the declaration via the employer, with a requirement for people, as part of their declaration, to supply their staff number or payroll number. The electoral registration officer will then be able to check with the employer that the applicant is entitled to register by virtue of a declaration.
In addition, EROs will be required where necessary to send a second reminder to people, such as overseas electors or service voters who are registered by virtue of a declaration, that their declaration is about to expire. Noble Lords may recall that in May the House approved regulations that disapplied the follow-up process for overseas and service voters, and may wonder why we are now being asked to apply it again. The answer is that we are not proposing to reinstate the previous process that would have required EROs, after the expiry of the declaration, to send an invitation to register to special category electors, followed up by two reminder letters and, theoretically, a visit by a canvasser. That process would have been expensive and impractical in the case of many special category electors, and it is right that it is no longer a mandatory requirement. Instead we are introducing a requirement for EROs to send just one further reminder to those special category electors whose declaration has not yet expired but which is about to do so. I am told that in a large number of cases, online addresses are available and it will be possible to do this online. This is a relatively simple step to take, without the need for the more protracted subsequent process that we rightly removed earlier in the year. The regulations also make minor updates to statutory references to registration appeals.
The Scottish regulations will also extend to Scotland one of the provisions on data sharing by local authorities for electoral registration purposes that were introduced for England and Wales in May. These allowed for the disclosure to an ERO of information contained in records held by the authority by which he or she was appointed, provided that a written agreement was in place between the authority and the ERO as to the processing of the information.
The different local government structure in Scotland rendered a provision for two-tier area data sharing, as set out in the legislation introduced for England and Wales, unnecessary. At quite a late stage in the drafting of the England and Wales legislation it was decided to provide additionally that the ERO’s own local authority may disclose its data to the ERO, provided that a written agreement was in place covering the use of the data. It appeared that such a change might also be relevant to Scotland but we undertook to consult EROs and local government organisations in Scotland about that before we sought to legislate. That has now been done. Here, therefore, is the regulation.
The Electoral Commission is content with the provisions of these instruments and the Information Commissioner did not consider that they raised any new or significant data protection or privacy issues. The three statutory instruments before the Committee will each play a part in the continued successful implementation of individual electoral registration in Great Britain, and I commend them to the Committee.
Lord Tyler (LD)
My Lords, I want to speak particularly to the second statutory instrument in the group, which relates to the pilot scheme to which my noble friend referred in the early part of his remarks. He quite rightly—and I welcome this—spoke of the whole context of this transition to IER. Those of us with the battle scars of a number of debates in Grand Committee over many years, going back to the previous Government—IER was a previous Administration’s initiative—will recall that this context has caused quite a bit of controversy, and rightly so because, as he emphasised, the register is a critical foundation stone of our whole representative democracy. The present Government, the coalition Government, have not changed the transition in any substantial way but accelerated the process. So my noble friend has rightly referred to the extent to which the Government are determined—I think the phrase he used was that they intend to take “considerable care” in how this transition proceeds. It is in that context that these orders are so important.
Lord Kennedy of Southwark (Lab)
My Lords, I have no issues with the orders or regulations before us today. They are part of a series that have been coming to Grand Committee for consideration as we move towards individual electoral registration. I do, though, have concerns that I have raised many times before in Grand Committee regarding the speed at which we are moving—the noble Lord, Lord Tyler, referred to this—and the risk of people dropping off the register. I do not believe that the Government have given sufficient weight to this as part of their preparation for the switchover. I have never understood what the rush was about on the part of the Government and why they would risk the system being brought into disrepute, all for the sake of a bit more time and planning. As the noble Lord, Lord Tyler, said, this was originally an idea of the Labour Government. I am a big supporter of IER but the Government’s speedy approach to it worries me.
We have never had an over-registration problem in the UK; rather, we have an under-registration problem. Much academic research states that 6 million or up to 9 million people are not registered to vote. The Representation of the People (Scotland) (Amendment No. 2) Regulations 2014 and the Representation of the People (England and Wales) (Amendment No. 2) Regulations 2014 are sensible moves enabling the declaration made by overseas Crown servants and British Council employees to be made online, along with a requirement that EROs must, where necessary, send a second reminder to people who are registered by virtue of a declaration when their declaration is about to expire. It is also sensible that Crown servants and British Council employees are able to use the online service in the same way as overseas electors and service voters.
I looked at the consultation list and would welcome the noble Lord, Lord Wallace of Saltaire, saying a bit more about it, particularly who the members of the Cabinet Office panel of experts in electoral administration are, how someone is appointed to this body, who chairs it, and what its remit is. I think that a wider policy community could be consulted on matters of electoral policy. I note that the Government consulted the Electoral Commission as part of bringing this order to your Lordships’ House, as required by Section 7 of the Political Parties, Elections and Referendums Act 2000. I am talking generally rather than specifically about this order, but if the Government are not going to consult the political parties directly, I suggest it would be good practice for officials to ask the Electoral Commission whether this issue has been brought to the attention of the Parliamentary Parties Panel set up under the Act, which is formally required to be consulted. I was a member of that body for many years before I became an electoral commissioner and I do not believe for one minute that its full potential has ever been reached. The panel has election experts from all the parties who can give a very practical and down-to-earth view of what things are like on the ground. I think that is sometimes missing from our discussions here.
The Electoral Registration Pilot Scheme Order 2014 is a sensible move and I am happy to support it. However, will the noble Lord, Lord Wallace, tell the Grand Committee what work is going on to identify other departments and agencies that could be brought into scope to assist in getting eligible citizens on to the electoral register? As I said, at least 6 million people are not on it. The noble Lords, Lord Wallace and Lord Tyler, referred to the fact that young males do not always go on the register. That is an important point, but the same could be said of people living in social housing and the private rented sector, and of ethnic minorities. Whole groups of people are not registered to vote. If we get to the point where fewer people are registered to vote when the measure comes fully into operation than was the case previously, that would be a terrible position to be in and a matter of much regret. It would be bad for democracy in this country and for our reputation both nationally and internationally, so we must avoid that.
Have the Government thought about speaking to large organisations such as Experian which hold vast quantities of data on everybody—Experian has more data than anyone else—and have the whole unedited electoral register, so they know where everyone is? I am sure that those organisations could very easily give every ERO in the country a list of everybody in an area who is not on the register. That would be a fantastic way to identify these people and get them on to the register. I think that it would be a very positive move. The data exist and these organisations could provide it. In addition to getting more people on to the register, which is good for democracy, some relevant people would dramatically improve their credit rating because that is affected by not being on the electoral register. Perhaps the Government could look at this issue. I would welcome the noble Lord, Lord Wallace, commenting on that point, perhaps not today but in the future.
Lord Wallace of Saltaire
My Lords, I thank both noble Lords for their helpful and intelligent comments. I start by reminding them that in another area of the Cabinet Office, we are much concerned with data sharing, digital privacy and the whole question of public and private data. Concerns about data privacy have been one of our inhibitions about moving in this area. Unfortunately we have not managed so far to bring forward a Bill to harmonise and update the laws which apply to different government departments on their collection and maintenance of data, many of which were put into effect long before cloud computing and two or three generations back in terms of the use of computers. The terms under which some government departments hold data are significantly different from those of other departments. I am sure I do not need to tell noble Lords that the sensitivities of the privacy organisations are such that we move with care in data matching, certainly in disclosure, both between different central government departments and between local authorities and central government departments. This is one reason why we have moved with all deliberate speed on this, using, first of all, the DWP database and moving on from there to the DVLA database. When we started out on this process there was some hesitation within the Department for Transport as to the terms under which the DVLA database ought to be made available for these purposes. We are in a very sensitive area in terms of data privacy and data sharing.
Lord Tyler
Before my noble friend leaves that point, is he saying that there was actually some legislative, statutory problem with the DVLA which did not apply to the DWP? If so, I totally understand the delay, but three years of delay because of some administrative, bureaucratic decision making within the Department for Transport is more depressing. I accept that good progress has been made and I hope my noble friend has not taken my contribution as being in any way negative about the overall process. However, this particular episode is not a very happy one since we were raising these issues more than three years ago.
Lord Kennedy of Southwark
The noble Lord, Lord Tyler, makes a very fair point. We are all looking back with care: we understand that we have to be right and proper, but it comes with a bit of a spring in your step at the same time. There is a question of care and there is also just not moving very quickly. I think we need to get on with it.
Lord Wallace of Saltaire
We understand that but I stress that there are other major issues. I happen to have been involved in some of the discussions about changing the system of legal protection for government collection and sharing of data. Noble Lords may remember that there were discussions early in the coalition Government’s period of office about whether or not we could do without the census next time round because all the material collected in the census is actually collected by the Government in the process of normal procedures, year by year. Some of the data are collected by local authorities, such as those about children going to primary school, which is one of the best indicators of the changing social and ethnic basis of a local community. If we were able to put all the data together, much of what we get from the 10-yearly census would be provided. However, if we put all of that material together—including health records and NHS data—we would be in an area in which ordinary citizens and those concerned with data privacy begin to be extremely upset. This is part of the reason why the good progress we made with the DWP data gave us a feeling that we could move along in that way. We are now extending this by looking at the DVLA data. I am told that the pilot will start in December or early January and should be completed by 31 March. It will not be too late for late registration for some of these people. As I said in my opening speech, I stress that access to the DVLA database is not merely a matter of matching but also of discovering people who are entitled to be on the register but who are not registered. The unmarried young men category in particular, which we are all familiar with as a weak area, would enable us to make the electoral register more complete.
Perhaps I may say to the noble Lord, Lord Kennedy, that Experian has a symbiotic relationship with the electoral register because it uses it for a great many things. If you are not on the electoral register, you are often not on the Experian database. Another area we are concerned about is the overlap between public and private databases. When discussing the issue with various people who are concerned about it, I have explained that there is no clear boundary between some public and private databases. For example, when I renew my car tax online, the first thing the DVLA does is check the private insurance database to ensure that my car is insured. That is an example of the public going to the private and coming back. These are all part of what is changing as public and private databases become much easier. The Government—whichever Government they may be—hope that an enormous amount of time, effort and money will be saved by moving more and more of these kinds of data online.
The problem is that this has huge implications for individual privacy and we have to be concerned about it. When talking in Bradford nearly two years ago about why so many people are not on the register, I was told vigorously by local councillors and officials that those people do not want to be registered. They do not want the state to know who they are and where they are. That is part of the issue here.
Lord Kennedy of Southwark
The noble Lord is absolutely right on the point about the merging of public and private databases, and indeed it is the point I was trying to make. So much information about people is now being held by Experian and a host of other bodies that I cannot believe it is beyond the Government to talk to Experian and others, saying, “We are not looking for people’s medical records or driving licences. What we are after is the data matching that is taking place for you being provided to local authorities. They can then see that in a certain street there are three people who are not on the register but they do actually exist. We know that because we have their bank details and driving licence particulars and we know where they shop”. All we would ask for is that Experian should give the council the name and address; it is as simple as that. I get the privacy point, but my worry is that we will end up with fewer people on the register than we have ever had before, and that is a terrible place to be. I think that the Government should do everything possible to make sure that that does not happen.
Lord Wallace of Saltaire
I would mark that after the next election, we will have a major debate and a draft Bill on the question of data sharing. If we were to access the Google and Amazon databases, I am sure that that would go a good deal further to identifying those who are not on the register, but the Government do not have the legal right to do so, and again, it raises huge questions of privacy.
I think it was the noble Lord, Lord Tyler, who raised the question of an additional door-to-door canvass in the spring of 2015. When I visited the ERO for Wandsworth a couple of years ago—I should mention that the Wandsworth ERO is a member of the Government’s consultative panel—he told me that given the mix of sheltered social housing and new apartment blocks at the top end of the market, the borough of Wandsworth now has some 25,000 homes that are behind locked doors. The problem of gated accommodation, which all of us who deliver leaflets are painfully aware of, is making it more and more difficult to conduct the door-to-door canvass that we used to think was such an important part of the exercise. That is why we have to do all these supplementary things as far as we can. We intend to complete a door-to-door canvass as far as possible, but that is becoming much more difficult as we go on.
I will have to write to the noble Lord about precisely who was on the advisory panel of EROs. I have met a number of EROs during the last three years of the process, and have much enjoyed talking to them about the particular issues with which they are concerned. I will happily write on that.
There were a number of other questions. Why has it taken us so long to get round to data matching? I have explained that DWP records actually took us a very long way, and we are now seeing what we can do to gain further completeness. I was asked whether it was a cross-section of 24 areas—incidentally, it is 24 areas but 21 electoral registration officers, because in Scotland the electoral registration system covers several local authority areas. The areas range from Harrow, Southwark and Trafford to the City of Edinburgh, Bournemouth, Coventry and Newport—a fairly good mixture. I have marked one or two areas which have a high concentration of students and several inner-city areas. It includes the City of Edinburgh, for example, as well as Stratford-on-Avon. It is a pretty good cross-section of the country.
The noble Lord, Lord Kennedy, rightly keeps pressing us—as I hope he will continue to—on how confident we are that we will come out with a higher rate of registration than before. I can say only that we are continuing to work towards that objective. We have made some extra funds available to local authorities for this and we are now considering whether further additional funds would be helpful. From what has happened in the last two or three elections, we all know that late registration produces a great boon. We will not know how successful we have been probably until the middle of April 2015, because a lot of the target groups will not have got round to filling in their online forms until the campaign is upon them.
The Government will continue to stress the importance of registering and of people being involved. We are working with a number of non-governmental organisations. I spoke at a Bite the Ballot conference a couple of months ago. Bite the Ballot is working very hard, as are a number of other organisations, with particular vulnerable groups—in its case, young people. However, it is a matter for all of us, in all political parties and beyond, to keep up the momentum as we approach the election of saying that it is very important that you register to vote and that you do vote. That is the final dimension of trying to capture the maximum number of people.
I have two other things to add about the overseas dimension.
Lord Tyler
I am sure, from the long experience that my noble friend will acknowledge, that the best possible way to get people to register and to vote is to have a very close election, as was demonstrated in Scotland, of course. When I got a majority of nine, I managed a turnout of 83% on a very wet and cold night in Cornwall. When my majority went up, the turnout went down. I do not know how he can achieve a close result in every constituency in the country, but that is the ideal way to get a good turnout next May.
Lord Wallace of Saltaire
I will not have to organise the next election. Many of us fear that it will be very disorganised in this respect and that the competition among four or five parties nationally, which will quite often be a competition between different pairs of parties in different constituencies, may make for an extremely confusing election campaign. I spoke at an annual general meeting in Yorkshire and said that I thought we were going to have what would feel much more like a series of by-elections across the entire country. It will be very different constituency by constituency when it comes to it, but let us hope that it does raise the interest.
On the question of overseas voters—
Lord Kennedy of Southwark
I am sorry to interrupt the Minister again. I know one or two local authorities. One of them is Manchester, where there has been a catastrophic drop-off in some areas in terms of registration, and that needs addressing. I also know of a local chief executive who was embarrassed to tell us that he sent letters out saying, “You haven’t been matched”, only to get one himself. He lives in the borough that he is the ERO for, and he himself had not been matched. He is not someone who has moved around very often; he has lived in the borough for many years and I assume that he has a bank account and stuff, but he did not match at all. There are one or two places where there has been a catastrophic drop-off. That is really bad. Perhaps the Minister could get his officials to talk to some of these local authorities. In certain pockets there are problems bubbling away.
Lord Wallace of Saltaire
We are well aware that one of the reasons why the electoral registration business is a local one is that the pattern varies so much from one place to another. The debate now going on about whether additional funds should be made available would of course be concentrated in those areas that have found the greatest difficulties. Again, we are well aware of that.
I will just pick the noble Lord up on one of the things he said. He said that we have never had an overrepresentation problem in the UK. I think I would agree with him that we have never had an overrepresentation problem in Great Britain, but those of us who know something about Ulster politics know that there have been interesting issues in Ulster over the past 50 years.
We are exploring further measures to increase student registration ahead of the general election. We are, for example, looking at emerging evidence from pilots undertaken in Sheffield and Manchester that tested the scope for integrating electoral registration with university enrolment. A lot of these things are under way but we do not quite know where we are.
On the question of overseas voters, we will be having a debate on this next week so we will return to it then. Overseas registration, as I think noble Lords will know, is an extreme example of the extent to which the number of voters registered more than doubles in the run-up to a general election and then falls off afterwards, so again we may anticipate that. The extent to which we can encourage more overseas voters on to the register will be assisted by this measure because the easier it is to register online, the more that overseas voters are likely to do so. I hope that I have answered all the questions and points that have been made, and I beg to move.
Electoral Registration Pilot Scheme Order 2014
(10 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Wallace of Saltaire
That the Grand Committee do consider the Electoral Registration Pilot Scheme Order 2014.
Relevant documents: 9th Report from the Joint Committee on Statutory Instruments.
Representation of the People (England and Wales) (Amendment No. 2) Regulations 2014
(10 years, 1 month ago)
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Lord Wallace of Saltaire
That the Grand Committee do consider the Representation of the People (England and Wales) (Amendment No. 2) Regulations 2014.
Relevant Document: 9th Report from the Joint Committee on Statutory Instruments
Business Improvement Districts (Property Owners) (England) Regulations 2014
(10 years, 1 month ago)
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Baroness Williams of Trafford
That the Grand Committee do consider the Business Improvement Districts (Property Owners) (England) Regulations 2014.
Relevant documents: 11th Report from the Joint Committee on Statutory Instruments
Baroness Williams of Trafford (Con)
My Lords, noble Lords will know that business improvement districts provide a mechanism for the local business community to come together and agree to fund improvements to its local trading environment.
Introduced in 2004, business improvement districts have proved to be a popular tool, with more than 180 now in operation across England, many of which are now in their second or third term. However, only the occupiers of property—the business ratepayers—currently can vote in a ballot to establish a business improvement district levy to determine what improvements will be made and agree the funding arrangements. Property owners can contribute but only on a voluntary basis and only after the business improvement district has been established. Not only does this mean that property owners do not get an opportunity to influence the activities or services provided by the business improvement district, but the arrangements are arguably inequitable, because all property owners benefit from the business improvement district’s activities but only some contribute financially
Through these regulations, therefore, we are proposing to give property owners the opportunity to promote their own business improvement districts, where primary legislation allows. I say “where primary legislation allows” because noble Lords should note at this point that property owner business improvement districts can currently exist only where there is a ratepayer business improvement district in operation and where a business rate supplement is being levied. This is because the enabling powers are contained within the Business Rate Supplements Act 2009. As the only business rates supplement currently in operation is in London, to fund the delivery of Crossrail, a property owner business improvement district could be established for the time being only in London. We will, of course, certainly consider rolling out the powers more widely once we have had the chance to review the first schemes.
The case for property owner business improvement districts was recognised during Mary Portas’s 2012 review of the future of the high street. This highlighted the role of property owners in the regeneration of town centres, and she recommended that the Government should legislate to allow landlords to become high-street investors by contributing to their business improvement district. The Government accepted this recommendation and in 2013 consulted on the introduction of property owner business improvement districts. Consultation responses supported the principle of establishing property owner business improvement districts and the detailed approach the Government proposed. That approach was that the rules and procedures for property owner business improvement districts should, as far as possible, mirror that of the successful model adopted for ratepayer business improvement districts. These regulations enshrine that approach.
As with ratepayer business improvement districts, these regulations give a large degree of discretion to the business improvement district proposer. The size and location of a BID, the identification of those liable for the levy—and therefore eligible to vote in the ballot—the amount of levy and the activities or services to provided within the BID are all matters to be determined locally and must be clearly set out in a proposal document. Importantly, it is also for the proposer to set out the type of owner who should be liable for the proposed levy. So, for example, that may be the freeholder or long leaseholder, as the proposer sees fit, taking account of local circumstances. The proposal document should also identify the ballot date, the commencement date, a statement of any existing baseline services in the area and a map and description of the geographical area of the business improvement district. The ballot will be organised and run by the ballot holder, who will be the returning officer for elections for the relevant local authority. The ballot holder will be responsible for issuing the ballot papers and announcing the outcome of the ballot. In doing this, the ballot holder is required to state the total number of votes cast, the aggregate rateable value of each property class identified as being eligible to vote, the total number of votes cast in favour of the question on the ballot paper and the aggregate rateable value of each property class cast in favour of the question on the ballot paper
A business improvement district can be established only if the outcome of the ballot confirms that a majority of both the number of persons voting and the aggregate rateable value have voted in favour of the proposals. This mechanism provides protection against the setting of excessive levies. Once a property owner business improvement district has been established, the relevant billing authority will be responsible for issuing bills and collecting the levy, thereby maintaining consistency with the existing ratepayer business improvement district and business rate supplement. The authority will also be required to hold a separate business improvement district revenue account. The billing authority can also veto the establishment of a business improvement district where they feel the activities of the business improvement district conflicts with any of their policies or where they consider that there is a significant and inequitable financial burden on a particular class of property owner.
Noble Lords may also wish to note that there is a right of appeal against the ballot where a material irregularity appears to have occurred. A request to the Secretary of State to declare the ballot void must be made within 28 days of the notification of the outcome of the ballot and can be made by the billing authority, the business improvement district proposer or a person representing at least 5% of those eligible to vote. These regulations allow for the creation of property owner business improvement districts, which I believe will offer a welcome addition to tools this Government have provided to regenerate the high street and help businesses to grow, and will do so via a set of rules and safeguards built on tried and tested ratepayer business improvement district regulations. I commend this order to the House.
Lord McKenzie of Luton (Lab)
My Lords, I thank the Minister for introducing these regulations. I should make it clear that we support the proposition of property owners, the business community and local authorities working together to improve the local trading environment. BIDs themselves have a cross-party pedigree in that it was the Conservative Government who commissioned research in 1997 to assess how they might be established and it was the former Labour Government who legislated for their introduction. I was going to ask the Minister how many BIDs are currently in existence, but the noble Baroness answered that question. I think there are more than 180, with some in their second and third term.
BIDs were driven by a ballot of all non-domestic ratepayers in a proposed area. The idea of a property owner BID is driven, as the name suggests, by the ownership of property rather than its occupation, although a person could qualify under both. Property owner BIDs have developed from the Portas review of high streets. It is understood that the legislation will allow a property owner BID only for areas where there is both a ratepayer BID in place and a business rate supplement being levied. The noble Baroness confirmed that in introducing these regulations. A business rate supplement can be levied by upper-tier authorities in order to fund economic development projects. The Explanatory Note and the Minister today remind us that a business rate supplement is being levied at present only by authorities in London for Crossrail, so it would be possible to have a property owner BID only in London at the current time. Can the Minister say more about why the BRS is seen as a prerequisite for a property owner BID? What does she see as the timing of looking at developing this so that other areas of the country have an opportunity to undertake the same sort of investments? Are there any proposals for the BRS to be levied elsewhere? If not, it would seem that the rest of England is missing out. Perhaps the noble Baroness can tell us what the position in Scotland, Northern Ireland and Wales is in this regard.
I have a number of other questions. Where the property ownership involves a freeholder or a leaseholder, or possibly a sub-lessee, as well as a tenant, who will have the right to vote in a ballot for a property BID? As I understand it, the noble Baroness suggested that it would be for the proposer of the property owner BID to decide who should be on the electoral roll for these purposes and subject to the levy, but it would be helpful to have some clarification of that. Would it always have to be the same type of ownership? Would it be possible for a proposer of a BID to say that it would be freeholders in some instances and long-leaseholders in other instances who would be involved in these arrangements?
Baroness Williams of Trafford
I thank the noble Lord, Lord McKenzie, for his constructive comments and questions and for the interesting history that has led to this on a cross-party basis, which is always good. The noble Lord’s first question was why BRS was a prerequisite. It is because that was how the legislation was framed back in 2009. He also asked whether it would be possible for the proposer to decide to levy only on leaseholders or freeholders. The answer is yes: it is at the discretion of the BID proposer to decide who should be levied.
Lord McKenzie of Luton
Could I clarify that with the Minister? Can the promoter of the property-related BID choose that it is a freeholder in one case, long leaseholders in another and a sub-lessee in another? What sort of information is expected and on what basis will those judgments be made?
Baroness Williams of Trafford
I will get the answer to that in a second. I am guessing that it would not be possible for him to discriminate against somebody because they were a freeholder and that it would be in relation to the types of property that were in the BID.
The noble Lord’s other question was what would happen if there were outstanding contracts when the five years were up. The BID body is expected to manage its business while recognising the potentially limited timeframe in which the BID will exist. It is a short timeframe but it can be renewed. The noble Lord also asked about conflict.
Baroness Williams of Trafford
My Lords, the answer to the question of whether the proposer can differentiate between leaseholder and freeholder is yes, but he has to give a reason why in the proposal. I am sorry, I have completely lost my stride, but I am sure the noble Lord will tell me if I have missed any questions out.
There was also a question on multiple ownership and what would happen if more than one person was levied and voted in the ballot—that is, a leaseholder and a freeholder both have an interest in the property. There could be more than one property owner in respect of the same hereditament. The legislation provides that in those instances the rateable value is divided between the owners for the purposes of calculating the result of the ballot.
On the question of what happens if a BID conflicts with an existing ratepayer BID, the only conflict that could occur would be around what each BID is doing. In practice, we would not expect this to happen and would expect proposers of a property owner BID to be talking to an existing BID company about the value that they could add.
The noble Lord asked whether there are plans to levy business rate supplements elsewhere. Not that we are aware of. We have addressed the question of outstanding contracts and when the five years are up. I think that I have answered all the questions but I am very happy for the noble Lord to intervene if I have not.
Lord McKenzie of Luton
I am grateful to the Minister for a good set of replies. Can I come back on the issue of multiple ownership? Let us assume that there was a person who owned two freeholds and each was occupied directly so the divvying up of rateable values was not an issue. When it comes to a vote, you look at the numbers of voters and the aggregate rateable value. If someone owns two properties, are they counted twice for those purposes or only once?
Lord McKenzie of Luton
I want to make one final point on the issue of terminating arrangements. Say you had a property owners’ BID—which might be expected to last for three years if there are two years gone of the other one—but the ratepayers’ BID was terminated early for some reason, that would automatically bring to an end the property owners’ BID. Obviously, if that was prior to its expected end, there could be contractual issues. How might that be resolved? Have those situations arisen under ratepayers’ BIDs?
Baroness Williams of Trafford
I am guessing that they would follow the same legal arrangements as any contractual arrangements and be dealt with in the proper legal way—breach of contract, for example.
Baroness Williams of Trafford
With that, I commend the regulations to the Committee.
House of Lords
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text
Income Tax
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Wood of Anfield
To ask Her Majesty’s Government what is their assessment of the level of income tax receipts so far this financial year.
Lord Newby (LD)
My Lords, the Office for National Statistics’ latest estimate for income tax and capital gains tax for the period April to September 2014 is £71.5 billion.
Lord Wood of Anfield (Lab)
I thank the Minister for that precise answer. As today’s alarming ONS figures confirm, this Government are presiding over a recovery in which wages, far from recovering, have continued to deteriorate. As a result, the public finances are getting worse and social security spending targets are being missed by over £15 billion. The deficit continues to rise. Will the Minister tell us why this is the case, and say whether he agrees that in the light of this, the Prime Minister’s promise in October of further unfunded tax cuts lies somewhere between heroic and reckless?
Lord Newby
My Lords, I remind the noble Lord, and the House, that growth in the UK is the highest among the G7 countries; that unemployment has fallen by 324,000 in the past year; and that the other piece of news today, which he omitted to mention, is that the gender pay gap has fallen to an all-time low.
Lord Wrigglesworth (LD)
Does my noble friend not agree that the most important point is that 3 million people at the bottom of the earnings pile, including 1.8 million women, have been taken out of income tax completely? At the same time, the Revenue’s take has increased by some £5.1 billion over the past year. Is that not a classic example of a stronger economy and a fairer society?
Baroness Nye (Lab)
My Lords, will the Minister say whether the Government are planning to raise VAT again to fill the hole in the tax receipts?
Lord Newby
My Lords, the Government have absolutely no plans to increase VAT.
Lord Lawson of Blaby (Con)
My Lords, is it not a bit cheeky for the noble Lord, who is the eminence grise of the party opposite, to talk about recklessness, when his party’s policy is to increase the deficit even more?
Lord Newby
My Lords, it is not always that I agree with my noble friend—but in this case I do.
Lord Davies of Oldham (Lab)
My Lords, how will the deficit be reduced if wages continue to fall, as they have done for 71 out of 74 months, and if, as has happened for virtually the whole of this Administration, wages fall in real terms, so that less tax is paid?
Lord Newby
My Lords, wages have fallen, but they have started rising in real terms. The OBR and every other forecaster that has made projections of real wages for the next few years in the British economy are firmly forecasting consistent real-wage growth.
Lord Forsyth of Drumlean (Con)
My Lords, will my noble friend tell us what the effect of cutting the top rate of tax from 50p to 45p was? Did revenues go up or did they go down? What was the effect of putting up the capital gains tax rate? Did revenues go up or did they go down?
Lord Newby
My Lords, the impact of the reduction in the 50p tax rate was about £100 million, when all the secondary effects were taken into account. In respect of capital gains tax, I will need to write to the noble Lord.
Lord Haskel (Lab)
Did the Minister see the research recently which said that paying a living wage encouraged people to be more productive and raised the level of income tax? Why do the Government not just do it?
Lord Newby
My Lords, paying the living wage is something that the Government support but, as we have discussed before in your Lordships’ House, there is a balance between rising wages and unemployment. That is the basis on which the minimum wage is set. I gave an example from the Dispatch Box the last time we discussed this: having spoken to people working in the textile industry in Leicester, they demonstrated to me that a big increase in the wage that they were paid would mean that fewer of them would be earning it, because they would be out of the job.
Lord Phillips of Sudbury (LD)
My Lords, is it not the case that income tax should be a good deal higher, particularly if those in the higher ranges of income paid their full amount of tax? What are we doing to tighten the receipt of income tax from all who should pay it?
Lord Newby
My Lords, the amount of income tax paid by the top 1% is now 28% of the total income tax revenues, which is the highest proportion it has ever been. That is because this Government have put substantially more money into fighting tax avoidance and evasion—far, far more—than the previous Administration.
Baroness Farrington of Ribbleton (Lab)
My Lords, we have heard various Ministers refer to government employees in terms of paying the living wage. It appears to be a sort of “This ministry does, this ministry doesn’t” situation. Why does not the whole of government do that, particularly given that some of the people who work in those government departments live in London, where the cost of living is very high?
Lord Newby
My Lords, the Government support the principle of paying the minimum wage. A number of government departments are already doing it and others are considering introducing it.
Lord Teverson (LD)
My Lords, what progress are the Government making on multinational corporate taxation to ensure that UK-domiciled companies are not discriminated against in terms of international and UK markets?
Lord Newby
My Lords, as noble Lords will be aware, at the G20 last year the Prime Minister had this issue at the top of the agenda, since when the OECD has produced a whole raft of measures aimed at ensuring that companies pay their fair share of tax. Noble Lords will have seen the end of what was called the “double Irish” tax avoidance scheme in Ireland, and there are currently European Commission probes against tax avoidance in the Netherlands and Luxembourg. There has been a real tightening-up in this area, which was reinforced at the recent G20 summit.
Lord Hughes of Woodside (Lab)
My Lords, will the Minister reflect on what he has just said? If I heard him right, he said that most government departments were paying the minimum wage and that some are considering introducing it. Was that a slip of the tongue? Surely, no government department is paying less than the minimum wage. Did he mix up the minimum wage and the living wage?
Lord Newby
I am not sure, my Lords, but what I meant to say was that while all government departments obviously pay the minimum wage, a number are paying the living wage and we are encouraging more to do that.
EU: Reform
(10 years, 1 month ago)
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Lord Maclennan of Rogart
To ask Her Majesty’s Government what discussions they have had with European Union institutions about proposed reforms of the European Union.
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con)
My Lords, Ministers regularly discuss EU reform with counterparts in the EU institutions. The appointment of a new Commission offers a new opportunity for continued engagement on this subject. The Foreign Secretary held discussions with the European Commissioners’ first vice-president on this subject only two days ago. We will continue to take every opportunity to work with our European partners to achieve the reforms that Europe needs.
Lord Maclennan of Rogart (LD)
I thank the noble Baroness for her Answer. If the Government wish to see constructive and democratic reforms introduced into the governance and operation of the European Union, why are they not more open about their proposals? Would they not be more likely to succeed if they were to seek to initiate a new convention on the future of Europe which could achieve consensus about reform rather than threatening the other 27 member states with possible break-up?
Baroness Anelay of St Johns
My Lords, we have been very transparent about the reforms we want. The Prime Minister and the Deputy Prime Minister have set out publicly their vision for a more competitive, flexible and democratically accountable EU, with fair treatment for those within the eurozone and those outside it. That is in the interests of all member states. My noble friend refers to the potential for a convention. The only convention to date that has examined extensive revision of the treaties is the one in which my noble friend served some while ago. It compromised 105 full members, including Heads of State, members of national Parliaments, MEPs and Commission representatives, and the process took two and a half years. As a mature organisation, Heads of State are capable of talking to each other and coming to mature decisions.
Lord Liddle (Lab)
My Lords, I am sure the noble Baroness will agree that Sir John Major commands enormous respect on all sides of this House. Will she therefore endorse very clearly what he said last week about our membership of the European Union: that despite the frustrations of membership, which are many, and despite the reforms that are needed, which are many, there is absolutely no doubt—without equivocation—that our interests lie in remaining a member of the EU? Do this Government agree with the former Conservative Prime Minister?
Baroness Anelay of St Johns
My Lords, I admire Sir John Major. I know the work he did as Prime Minister and within European matters, and the struggles that he faced. He above all people knows what is involved. I agree with what he said, which was that our future is within a reformed European Union. The Prime Minister David Cameron has said that, too.
Lord Howell of Guildford (Con)
Does my noble friend agree that successful and fundamental EU reform, which is badly needed, requires two things: first, a very strong alliance of the peoples and the Governments of the European Union, many of whom are longing for really radical reform to bring the EU into the 21st century and, secondly, a deeply thought-out strategy for the kind of EU model we need to work in the 21st century, which is at present lacking? Will she assure us that at the highest level these matters are being given very strong attention and are being pursued vigorously?
Baroness Anelay of St Johns
My Lords, I can. The contribution made yesterday by the German deputy Finance Minister on “Newsnight” made it clear that strong and productive discussions are afoot.
Baroness Ludford (LD)
Will my noble friend the Minister confirm that once the opt-back-in to the 35 measures is complete, the UK will be in a strong position to push for reform in the areas of policing and criminal justice and civil liberties, including reform of the European arrest warrant, which is needed, as well as staying within the instrument itself?
Baroness Anelay of St Johns
My Lords, this Government have already reformed the process of the European arrest warrant. It is different from that which this House passed in 2004. The Government are strongly of the opinion that further reform is necessary across all aspects of EU activity to make it more flexible, competitive and democratically accountable.
Baroness Symons of Vernham Dean (Lab)
My Lords, will the Minister reflect a moment longer on the Answer she gave to the noble Lord, Lord Maclennan of Rogart, about the idea of a convention, which was echoed to some extent by the noble Lord, Lord Howell of Guildford? It is not just a question of Heads of Government making decisions; it is a question of Heads of Government being able to convince their Parliaments about what is necessary in a reformed Europe. To do that, we need a wider coming together of the various political groupings in Europe. I think the noble Lord, Lord Maclennan of Rogart, is on to something and I ask the Minister to reflect again on that.
Baroness Anelay of St Johns
My Lords, I agree that the European Union needs to be more democratically accountable, and any changes within the European Union should therefore involve the participation of national Parliaments. There is much that can be done to ensure that national Parliaments have a stronger role to play. We now have a new Commission and a new head of the Commission, and there are prospects for a very constructive discussion about how we take these matters forward. In the first instance, it takes leadership and that is what the various Governments throughout Europe are showing now.
Lord Garel-Jones (Con)
Does my noble friend agree that the championing of the single market under the Single European Act 1986 was one of Margaret Thatcher’s great achievements as Prime Minister, aided by a Member of your Lordships’ House, Lord Cockfield? Does she further agree that, about 30 years on from that date, there will inevitably be a number of areas where adjustments can and should be made in the interests of all member states without undermining the basic principles on which the single market is based?
Baroness Anelay of St Johns
My Lords, yes, I agree with my noble friend. I have tried to argue over the last four or five weeks that the single market is, indeed, a British success story—my noble friend makes an important point. The United Kingdom has played a leading role in shaping the single market. We have been instrumental in driving its continued liberalisation, particularly in services. My noble friend is right; this is 30 years on, so while the single market is Europe’s greatest success, it must reflect the needs of the 21st century, with a stronger market, particularly in services, both digital and in energy. Further reforms are needed and we can lead on that.
EU: Migration
(10 years, 1 month ago)
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Lord Lea of Crondall
To ask Her Majesty’s Government whether they have made any proposal to other European Union member states, either severally or collectively, which would limit (1) the right of United Kingdom citizens to live and work in other European Union member states, or (2) the parallel right of citizens of other European Union member states to live and work in the United Kingdom.
The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con)
My Lords, the Government have regularly engaged with other member states on the issue of free movement, the Home Secretary has consistently pressed for action on abuse and the European Council has recognised that this issue needs to be tackled. The Government have also started a debate on reforming the transitional controls for new member states and will engage constructively with other member states in discussion on how best to achieve change in this area.
Lord Lea of Crondall (Lab)
I thank the Minister for his reply, which means no. The reason it is no is that it has obviously dawned on the Government, belatedly, that this would require reciprocation by all the rest of the 28 member states.
I have two supplementaries. First, does the Minister agree that there is a broad balance at the moment, not by design but by the facts on the ground, between the number of Brits living over there, in the EU, and the number of Europeans coming here? Roughly 2.2 million gain a living there and there are a few more here. Secondly, is the Minister aware that it is not exceptional to have this arrangement in Britain? Does he agree that, for example, there are far more people from the rest of the EU living in Germany—not least from Greece and Romania—than are living here in Britain?
Lord Bates
First, my initial Answer was yes not no. It was that we have been engaging with Europe. The European Commission has endorsed this approach. The noble Lord referred to Germany. The German Government are passing legislation through the Bundestag to restrict the benefits of those who come to Germany when they are not genuinely seeking work. It was tested in the European Court of Justice. These are exactly the types of reforms and reviews which we have been pushing, from our side, and which are getting greater support across the other member states of the European Union.
Lord Deben (Con)
Does my noble friend agree that tone is very important in these issues? We should show quite clearly how much we benefit from the large number of people from the rest of the European Union working here, and how much the rest of the European Union benefits from people from the United Kingdom going there. If we talked a bit more cheerfully about this—the greatest peacetime achievement that has happened in Europe—perhaps people would be more willing to listen to our comments.
Lord Bates
I totally agree with my noble friend about tone. The British people have a reputation for hospitality and tolerance and have welcomed people who are making a positive contribution to our society. However, that of course has its limits and we need to be mindful that there is great concern about unrestricted, uncontrolled immigration into this country and the impact it has upon social cohesion and our public services.
The Lord Bishop of Worcester
My Lords, the Minister mentioned the reputation that this country has for hospitality. Is he aware of an associated issue: the difficulty that members of the Commonwealth face in obtaining a visa even to visit, let alone to work and live in this country, which seriously hampers a lot of very important overseas links with dioceses, including my own—so much so that my friends in Tanzania were unable to be present at my wife’s funeral earlier this year? Is that sort of impediment government policy and, if not, can he assure us that it will be addressed?
Lord Bates
We very much encourage people to come to this country, whether to study or to work. We want to encourage the best and the brightest to come to this country, as well as tourists; there are many people we want to encourage—but there is a difference between that and people who significantly abuse the system in coming here because of benefits.
Lord Davies of Stamford (Lab)
My Lords, following the point made by the noble Lord, Lord Deben, the very useful statistics on the numbers of EU citizens here as opposed to British citizens living in the EU brought forward by my noble friend Lord Lea—it is about exactly the same—and given the statement the other day by the director-general of the CBI, who does not know of a company in this country that is not in some degree dependent on immigration, will the Government agree that free movement of labour, apart from being a most valuable human right, is actually a factor of considerable economic importance in this country?
Lord Bates
We totally agree with that. I have to say that the figures that I have are that there are 2.3 million EU nationals living in the UK and 1.4 million British citizens living in the EU. Those are very important for the success of the single market, which has already been referred to. Of course we welcome people who genuinely want to come here to work, study or visit.
Lord Teverson (LD)
My Lords, the United Kingdom has a proud record of campaigning for the enlargement of the EU and bringing our eastern colleagues in Europe into the fold of the European Union. We have had great credit for that in the past. Is it not a great shame that through our rhetoric we are turning those countries that came into the European Union in 2004 from friends into people who resent our attitudes towards them?
Lord Bates
I do not accept the premise that we are alienating people. People recognise that there are legitimate concerns here; if proper transitional arrangements are put in place, that can aid relations between both countries, such as the ones that we have used in the case of Croatia, which will remain in place until 2019.
Baroness Sharples (Con)
My Lords, is it not the fact that the number of children coming into school with English as their second language has risen from 6% last year to 16% this year?
Lord Bates
My noble friend is absolutely right, and that is one reason why we have said that it is a condition of immigration that the English language must be an important part of that.
Baroness Smith of Basildon (Lab)
My Lords, the Minister will have heard the disappointment and concern on his side of the House that the Government do not seem to be building workable relations with other countries in the European Union. That makes any change much more difficult. Could the Minister tell me specifically which member states have backed the Prime Minister’s proposals to restrict free movement within Europe?
Lord Bates
We are not talking about restricting the free movement of labour—we are talking about restricting the free movement of benefits. I have already listed a number of countries, and Germany is a prime one, which have particular concerns on this that are shared. That includes some of the Nordic countries as well. Some of those countries also had transitional arrangements put in place when we enlarged with the A10 countries in 2004, which the previous Government did not put in place. That led to the major problem that we are now living under.
Lord Spicer (Con)
My Lords, in the context of this Question, and the previous one, how do we reform the European court?
Lord Bates
I was going to say that that is a question for another day. That will of course be part of any wider negotiation, but let us recognise that in the case brought by the German Government before the European court about benefit tourism—the Dano case—the court actually upheld the decision, which is something that we and the German Government welcome.
Alcohol: Sale to Children
(10 years, 1 month ago)
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Lord Brooke of Alverthorpe
To ask Her Majesty’s Government, further to the answer by Baroness Williams of Trafford on 17 November, in what manner the proposal to repeal the restriction on the sale of liqueurs to children formed part of the public consultation on the Deregulation Bill.
Baroness Williams of Trafford (Con)
My Lords, the proposal to repeal the offence of selling liqueur confectionery to those under the age of 16 is part of the Government’s Red Tape Challenge, which seeks to remove unnecessary burdens from businesses. A public consultation led jointly by the Department for Business, Innovation and Skills and the Cabinet Office asked businesses and members of the public for their views on deregulating a wide range of regulated activity.
Lord Brooke of Alverthorpe (Lab)
My Lords, I am grateful to the Minister for at last answering the questions I raised on that, but I find her Answer quite unacceptable. I have before me the policy guide to the Deregulation Bill, published by the Cabinet Office for the Minister responsible, which says under the details of consultation only:
“The proposal has not been part of the public consultation, but was suggested by business”.
That was produced by the Cabinet Office. Why do the Home Office, the Ministers and others concerned not know what is happening on this?
Baroness Williams of Trafford
My Lords, it is my understanding that the consultation was open to both businesses and members of the public.
Lord Naseby (Con)
Is my noble friend aware that I sat on the pre-legislative scrutiny committee for the Deregulation Bill, and that it was made clear to the members of that committee that, yes, each department was asked to put forward proposals, and anybody— an organisation, an individual or any party that had validity in the United Kingdom—could make representations? Indeed, in some areas huge numbers of representations were received. My noble friend is absolutely right. Representations did not come just from business; it was open to anybody who wanted to make a submission on liqueur chocolates to do so.
Baroness Williams of Trafford
That is indeed my understanding. I thank my noble friend for his clarification.
Lord Elystan-Morgan (CB)
Does the noble Baroness agree that it might have been a better hallmark of responsibility and of trust towards young people had there been an investigation by health authorities of the possible injurious effect of the ingestion of alcohol in any form on young people; and that that would have been much better than surrendering to the blandishments of business, which might not be entirely free of self-interest?
Baroness Williams of Trafford
My Lords, it is my understanding that concerns were not raised by any health bodies on the matters that we are discussing today.
Baroness Smith of Basildon (Lab)
My Lords, I would press the noble Baroness on this, because there is some confusion. In Committee, when this was discussed, the noble Lord, Lord Wallace, who was answering for the Government, said that it was not a matter for business and business had not asked for this. He thought it was a retail issue. However, the consultation policy briefing document from the Cabinet Office says:
“The proposal has not been part of the public consultation, but was suggested by business”.
Given that there are some concerns, which may or may not be justified, about deregulating the sale of liqueur chocolates to children, would it not be better, as the noble Lord said, to consult those who have an interest in public health and are concerned about alcohol misuse, and ask what their views are? Would that not be the more sensible way forward on an issue that is becoming controversial?
Baroness Williams of Trafford
My Lords, obviously I was not there on the Deregulation Bill, but it is my understanding that this consultation was open to anybody who wished to respond to it. It was widely advertised on the government website and, as I just said to the noble Lord, health bodies did not raise concerns about liqueur chocolates on this theme of restricted goods.
Lord Avebury (LD)
My Lords, did the Government take or seek advice from the BMA, Alcohol Concern, the Institute of Alcohol Studies or any other organisation concerned with the huge problem of alcohol harm in children?
Baroness Williams of Trafford
I am sorry, but I did not catch the last bit of my noble friend’s question. As I have said, I understand that those bodies did not raise concerns on this element of deregulation.
Lord Brooke of Alverthorpe
I regret having to come back to this but we must get to the truth. This was not part of the consultation. Indeed, this document has been taken down from the Cabinet Office website. Why, when the health of children is affected, have the Government not consulted their Chief Medical Officer, who is opposed, Public Health England and all the other health authorities that have a view—a view that they have so far not expressed because they have not been invited or asked to consult?
Baroness Williams of Trafford
My Lords, I can have a note sent to the noble Lord about why specifically health bodies were not consulted. In seeking to get the truth, I can assure the noble Lord that I am not evading it, but answering with the best information that I have.
Baroness Fookes (Con)
My Lords, may I seek clarification? The Question refers to liqueurs; the Minister has referred to liqueur chocolates. Which is it?
Baroness Williams of Trafford
I think that the noble Lord is referring to liqueur chocolates.
Baroness Armstrong of Hill Top (Lab)
My Lords, is not the issue that there was a general consultation, which asked, “Do you have any ideas for deregulation?”. That is how, on licensing, the idea of deregulating liqueur chocolates came into being. That is the issue and the truth. The truth is that the idea of carrying out this precise measure was never put to anybody else. Health authorities would probably never even dream that somebody would be daft enough to include that in the Deregulation Bill.
Baroness Williams of Trafford
I totally agree with the first part of the noble Baroness’s question, which she put very clearly—it was all part of the Licensing Act and general deregulation. As I said, there has been no response from health authorities on concerns over chocolate confectionery, but it was covered by the general strand of restricted goods.
Lord Cormack (Con)
My Lords, is not the most dangerous ingredient in liqueur chocolates sugar?
Baroness Williams of Trafford
Judging by the unfortunate times when I have had to eat them, yes, it is.
Insurance Bill [HL]
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text
The Chairman of Committees
That, as proposed by the Committee of Selection, the following Lords be appointed to the Special Public Bill Committee on the Insurance Bill [HL];
L Ashton of Hyde, L Carrington of Fulham, L Davidson of Glen Clova, Hodgson of Astley Abbotts, L Lea of Crondall, L McNally, L Newby, B Noakes, L Woolf (Chairman);
That the Committee have power to send for persons, papers and records;
That the evidence taken by the Committee shall, if the Committee so wishes, be published
Delegated Powers and Regulatory Reform
(10 years, 1 month ago)
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The Chairman of Committees
That Lord Trimble be appointed a member of the Select Committee in place of Lord Bourne of Aberystwyth, resigned.
Social Security (Contributions) (Amendment No. 5) Regulations 2014
(10 years, 1 month ago)
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Lord Newby
That the draft Regulations laid before the House on 13 October be approved.
Relevant documents: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 17 November
Broadcasting (Independent Productions) (Amendment) Order 2014
(10 years, 1 month ago)
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Lord Gardiner of Kimble
That the draft Orders laid before the House on 8 and 21 July be approved.
Relevant documents: 8th Report from the Joint Committee on Statutory Instruments, 6th Report from the Regulatory Reform Committee, considered in Grand Committee on 17 November
Infrastructure Bill [HL]
(10 years, 1 month ago)
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Lord Newby (LD)
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Infrastructure Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Amendment 1
Baroness Kramer
“General duties of a strategic highways company
(1) A strategic highways company must, in exercising its functions, co-operate in so far as reasonably practicable with other persons exercising functions which relate to—
(a) highways, or(b) planning.(2) A strategic highways company must also, in exercising its functions, have regard to the effect of the exercise of those functions on—
(a) the environment, and(b) the safety of users of highways.”
The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, I agreed on Report to come back with amendments on two aspects over which noble Lords had concerns. I tabled Amendment 1 in recognition of noble Lords’ preference for the strategic highways company’s duties to be stated in legislation. It places a duty on the company in relation to the environment, safety and co-operation, noble Lords having expressed the strongest concern that that should be made clear. We have already made considerable change in taking on board concerns that were raised in Committee and on Report. It is the Government who must set broad policy on the environment and road safety and noble Lords will be aware that we have already amended the Bill to include an obligation on the Government to have regard to the environment and safety of users of the highway when setting or varying the road investment strategy. We are now taking this further by placing a duty on the company to consider those matters, meaning that the company itself is obliged to consider the impact of its operations on environment and safety.
Moreover, your Lordships will know that we have made changes to the powers of the monitor—the ORR—to hold the company to account and to measure and report on the company’s performance and whether it is meeting its duties, including on the environment and safety. I remind your Lordships that, in parallel with these high-level duties, we are using statutory directions and guidance from the Secretary of State to steer the company in the way it exercises its functions. We have extensively redrafted these prior to Report to reflect your Lordships’ concerns and these same issues are covered in great detail there.
In addition, your Lordships will note that we have also done even more than relying on statutory direction or guidance to ensure that the company co-operates. It now has a clear duty to co-operate in the areas of highways and planning with local authorities, devolved Governments, operational partners—such as the police and emergency services—other transport operators, and other bodies with a significant stake in the long-term development of the network.
I tabled Amendment 16 in recognition of your Lordships’ concern that there may be more than one strategic highways company provided for in Part 1 of the Bill. I have explained to the House that the Government have no plans to create more than one company and that the Highways Agency—in its new status as a government-owned company—will be the only company appointed when we bring these provisions into force. I recognise that further reassurance is needed on this point and therefore propose an amendment requiring parliamentary approval if the Secretary of State wishes to make an appointment order under Clause 1 which involves moving away from a single company structure. This strikes a balance in providing the flexibility for future Governments to move to a different structure—for example, a regional structure—should it be needed or desired, without the need for further primary legislation on the point, while meeting your Lordships’ desire for further discussion and approval by Parliament on the detail of how a multiple company structure would work in practice before allowing it to proceed. I hope that this provides a sensible compromise between your Lordships’ concerns and our desire to maintain a potentially useful option for the future, and for this reason.
In summary, I hope your Lordships recognise the effort we have made to ensure that there can be no doubt about what responsibilities the company has or how it will be held to account and that we have advanced considerable changes to meet the views expressed in this House. I beg to move.
Lord Davies of Oldham (Lab)
My Lords, I am grateful for these amendments, which certainly improve the Bill. I congratulate the Minister on the way she has conducted herself at the various stages of the Bill and on bringing forward these amendments in response to the arguments put forward in Committee. Those arguments were put forward particularly forcefully by my noble friends Lord Whitty, Lord Faulkner and Lord Berkeley. As the Minister will know, we started off with a great many reservations about the nature of the Bill and we are very pleased that the Government have gone some of the way towards making it slightly more difficult for multiple strategic highways companies to be set up. Amendment 16 ensures that Parliament will have a say on this, which is very much to be welcomed. I particularly appreciate Amendment 1, which ensures that the strategic highways company has regard to the environment and to the safety of users of the highways. These were issues about which we were very concerned on the Opposition Benches and we are pleased that the Minister has seen fit to propose amendments to the Bill as it then was.
However, it is still the case—as I am going to speak only once I hope the Minister will forgive me for moving a little further on—that there are questions which the Government have not adequately considered. An example is the needs of local roads in dealing with the challenges of huge numbers of potholes and the projected increase in traffic. The fact is that it is not the strategic system which creates the majority of problems for road users but local roads. The same applies to safety, where the Government have presided over a large reduction in road safety budgets and further action may be required. Among others, I obviously mention the issue of cyclists. That may seem marginal in a Bill that is predominantly concerned with strategic highways but, if one is talking about safety, one has to look at the growing use of cycles on our roads. That is greatly to be welcomed in many respects—provided that cyclists obey the law, I hasten to add—but we must also ensure that we do not get the kind of significant increase in cycling accidents that we have seen in recent years.
Baroness Kramer
Baroness Kramer
I shall speak also to Amendments 3, 4, 6, 8, 9, 10 and 12. Maximising the release of surplus public sector land is critical to supporting the Government’s ambitions to reduce the deficit, increase the number of houses being built and help to drive economic growth.
The new public sector land programme from 2015-16 will mean transferring a significant amount of surplus and developable land from government bodies to the Homes and Communities Agency and, in London, to the Greater London Authority. Disused government land can and does already transfer to the Homes and Communities Agency but the process is often more bureaucratic than is necessary. Clause 26 is about simply increasing the rate of delivery and efficiency by streamlining what essentially is an internal government procedure.
As I believe the House now largely accepts, the intention behind Clause 26 is not and has never been to sell off the nation’s forests. In recognition, however, of the strength of the House’s concern about the future security of the public forest estate, my noble friend Lord Ahmad committed on Report to table an amendment to make it clear in law that the public forest estate will not transfer to the HCA. The amendment we have tabled will prevent transfer of the public forest estate to both the Homes and Communities Agency and the Greater London Authority.
We have gone further than the amendment tabled by the noble Baroness, Lady Royall. Our amendment additionally seeks to address an oversight we have now identified in the original Housing and Regeneration Act 2008, which was passed under the previous Government. Section 51 of that Act makes it possible for land owned by central government to transfer directly to the HCA. The public forest estate is, of course, owned by central government and not—as we have repeatedly made clear when asked about these clauses—by an arm’s-length body. Needless to say, since the Labour Government introduced powers to transfer the public forest estate to the HCA six years ago, we have not used them. I am sure the fact that the legislation allowed this was an oversight rather than intentional, so we are now amending the 2008 Act to prevent any transfers under these existing powers. This now covers any transfers from a government department to the HCA where the land is part of the public forest estate.
I also make it clear that our amendment already covers the contingency that the amendments tabled by the noble Baroness, Lady Royall, seek to address. Our amendment will prevent the transfer of any land that is held by the Secretary of State and has been acquired, or is treated as having been acquired, under Section 39 of the Forestry Act 1967. This definition, therefore, covers all land that is under the management of the forestry commissioners at any given time, as well as land that is not being used for afforestation or purposes connected with forestry. I trust that this amendment will provide the comfort that noble Lords have sought on this issue.
In the same debate on Report, the noble Lord, Lord Phillips, raised a query about the potential scope of this clause, asking whether the definition of “public bodies” is too broad for the stated aims of the clause and whether it could, for example, allow for the transfer of land owned by charities. The noble Lord, Lord Ahmad, has written to the noble Lord, Lord Phillips, to set out why we think this clause is not likely to extend to the transfer of land from charities. However, for the avoidance of any doubt, we wish to make it clear in the Bill that transfers to the HCA or GLA using this power may happen only with the consent of the transferring body. I trust that this will allay any concerns that there would be any potential for a future Government to misuse this power. I beg to move.
Baroness Royall of Blaisdon (Lab)
My Lords, I will speak to Amendments 5, 7, 11, 13 and 14. I thank the Minister for coming back with the government amendments. I know that campaigners who have fought to protect our forests are also pleased that the Government have responded to their concerns. I am also grateful to the Minister and the noble Lord, Lord Ahmad, and their officials for the work they have put into ensuring that the exemption of the public forest estate from the Infrastructure Bill is in the Bill. However, while I accept what the Minister is saying about an oversight, her line of argument appears contradictory to statements at previous stages of the Bill when it was said that transfers of the PFE under this legislation could not happen. However, that is history.
I have tabled amendments to the government amendments with one aim—to make sure that the entire public forest is given the protection that noble Lords and campaigners have asked for throughout the passage of the Bill. However, I am still concerned about forest waste. Forest waste—in the forest that I know best, the Forest of Dean—is usually taken to mean land within or on the margins of the forest, not planted or used for forestry purposes. Forest waste is of great value in terms of biodiversity, ecology, amenity and recreation. Within the Forest of Dean there are a number of gales—shallow workings mined by free miners. These mines are clearly not used for afforestation or in connection with forestry, but they are a central part of the history and character of the Forest of Dean.
I am concerned that this forest waste may not be included and there could be some ambiguity as to whether it is suitable for afforestation or purposes connected with forestry. My disquiet is principally due to the part in brackets in Amendment 12 that states:
“(power to acquire land which is suitable for afforestation or purposes connected with forestry)”.
That does not include,
“together with any other land which must necessarily be acquired therewith”,
which is in Section 39(1) of the Forestry Act. I would be grateful for clarification from the Minister on that point. Will she confirm that forest waste is exempted from the Infrastructure Bill? In which case, I hope that she will accept my amendment as confirmation that this is the case.
Once again, this reflects the key message that arose repeatedly in our debate on Report on the need for the Government to legislate through a forestry Bill to protect the public forest estate. As the Woodland Trust said in its briefing ahead of Third Reading, for which I am grateful:
“We hope that the Third Reading debate, any subsequent further amendment—and scrutiny in the Commons—will ensure that protection is as strong as possible. Whatever the outcome of the Bill’s passage, however, it has to be said that this is a row of the Government’s own making through not bringing forward a Forestry Bill as promised. Indeed, this assurance within the Infrastructure Bill cannot be deemed a substitute for the bringing forward of legislation for the Public Forest Estate; a specific Forestry Bill is still needed to settle the future of the PFE and for the avoidance of any future doubt or confusion as to its status. We want to see that legislation brought forward at the earliest opportunity after the election”.
I strongly echo those sentiments. Again, I thank the Minister, but I also pay tribute to the campaigners, particularly those from HOOF who, through their dedication, care and passionate love of the forest, have fought time and again to ensure that it is protected for future generations.
Lord Clark of Windermere (Lab)
My Lords, I support my noble friend’s amendment. I take her point about forest waste. Equally, I am very grateful to the Government for the way in which they brought forward these proposals. On the face of it, they take us further forward and appear to give us greater protection.
I am delighted that the Government managed to find a weakness in the 2008 Act but it is very important that the assurance that I think the Minister gave today was that it included all land managed by forest commissioners. That is very important because, in recent years, we have had joint initiatives and joint ventures with the private sector that are not forestry—the provision of forest cabins, car parks, and so on. I remind the Minister that the Wildlife and Countryside (Amendment) Act 1985 required statutorily the Forestry Commission to manage economic forestry with environmental interests.
My noble friend referred to forest waste, which is vital. The Lake District, for example, includes a great many of the highest mountains in England, and is owned by the Forestry Commission but trees will not grow there and are not planted there. We must have an assurance that those areas of land are covered by the protection that the Minister seems to have brought forward today.
Lord Jenkin of Roding (Con)
My Lords, I do not begin to claim the same amount of expertise as the noble Lord, Lord Clark of Windermere, who of course is a former chairman of the Forestry Commission. We listen to him with huge respect on these matters.
I was puzzled by the amendment tabled by the noble Baroness, Lady Royall, and was not quite sure about its precise aim until she explained. I was under the impression that when my noble friend Lord Ahmad of Wimbledon undertook to bring back amendments at this stage, he greatly satisfied the House. A very strong case had been made by the noble Baroness and by other noble Lords that there was a real need to declare in the Bill the protection of the public forestry estate. I supported that and I was very glad to hear my noble friend Lord Ahmad at the end of the debate recognise the strength of feeling in the House and undertake to come back at this stage with the amendments.
Lord Judd (Lab)
At earlier stages of the Bill, I drew attention to the widespread and spontaneous concern—quite unprecedented in some ways—that had come from people right across the country about the precious and special nature of our forests. I think, therefore, that among a lot of people, there will be a great sense of relief at the amendment that the Government have introduced. Credit should be paid to them for the very commendable way in which they listened to the argument, went away and came back and responded to what the House said.
As for my noble friend’s amendment, I totally see the logic and importance of it. If we have just said that the other amendment is essential because of the very special nature of the forests—let us not be afraid of these phrases: the atmospheric nature of the forests, the spiritual nature of the forests, the physical and recreational nature of the forests—it really is important that intrusions, by carelessness or deliberate action, which spoil that special nature should be dealt with in a way that preserves the special characteristics of the forest. The two amendments go completely together. I hope that the Government will be able to take very seriously what my noble friend has argued and accommodate it.
Lord Berkeley of Knighton (CB)
I congratulate the Minister on listening to the points that a lot of us in this House made. As a rider to what has been said, a very important part of forestry—speaking as someone who has some—are those strips of land where you can extract timber to cut it up and prepare it to go to the timber mill or wherever it is going. This area that we talk of as waste is vital. To people in the country, it is not unlike those elements that you get at the sides of fields that are often put to set-aside or for biodiversity. The amendment makes a very good point and I am sure that the Minister will reassure us on it.
Baroness Kramer
My Lords, I think that we are all at the same place on this. My argument against the amendments of the noble Baroness, Lady Royall, is that they are unnecessary, because the issue is entirely covered in the language that I hope we will be bringing into the Bill through amendment, if your Lordships agree. The amendments prevent the transfer of any land held by the Secretary of State that has been acquired—remember, this is government-owned land—or is treated as having been acquired under Section 39 of the Forestry Act 1967. As I said earlier, that covers all land that is under the management of the forestry commissioners at any given time—whether by freehold or leasehold—and includes any land that is not being used for afforestation but is still under the management of the forestry commissioners or is not being used for purposes connected with forestry.
The provision is widely drawn. Not only does it include forest waste, it includes the kind of ancillary facilities that many noble Lords have pointed out are necessary. Indeed, there is not even a necessary test: it simply has to be under the management of the Forestry Commissioners. I am sure that that is exactly what the noble Baroness, Lady Royall, and the various campaigners were attempting to achieve.
We think that we have done this rather effectively because one of the challenges of writing legislation is to make sure that we do not include another unintended loophole. We think that this approach is rather effective. I hope that noble Lords will understand why I will resist the amendment because I believe that its principle is well incorporated into the amendments that we introduced.
This may be the last time that I have the opportunity to speak in the House on this phase of the Bill before it goes to the other place. The last group of amendments will be led from the Government’s perspective by my noble friend Lady Verma. I want to say that, in a sense, this last discussion reflects what has been an extraordinary quality of this Bill, for which I thank the whole House. So many Members of the House have taken responsibility for raising issues of concern, strengthening the Bill, looking for ways to make it more effective and recognising the underlying purpose and intent. The collaborative attitude of so many Members of this House—I include the Opposition in that—has led us to a Bill that will serve its purpose even better than the Bill that we originally drafted.
At the same time, I want to thank the most extraordinary Bill team who have facilitated and made all of that possible, and the staff from the many departments that have contributed to the Bill. They have shown an exemplary service in making sure the legislation reflects the genuine intent of this House. I thank the House for allowing me to proceed with this as well. The last group of amendments will be led by my noble friend Lady Verma.
Baroness Kramer
“(4A) The Secretary of State may not make a scheme under this section unless the specified public body to which the scheme relates has consented to its provisions.”
Baroness Kramer
“(4B) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
Baroness Kramer
“(2A) In section 51 (property etc transfers) after subsection (3) insert—
“(3A) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).””
Baroness Kramer
“(3A) The Secretary of State may not make a scheme under this section unless the specified public body to which the scheme relates has consented to its provisions.”
Baroness Kramer
“(3B) A scheme under this section may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
Baroness Kramer
“(5A) In section 408 (transfers of property, rights or liabilities to the Greater London Authority etc) after subsection (8) insert—
“(8A) An order under subsection (1) above may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).”
(5B) In section 409 (transfer schemes for transfers to the Greater London Authority etc) after subsection (8) insert—
“(8A) A scheme under subsection (1) or (2) above may not make provision in relation to land which is held by the Secretary of State and was acquired, or is treated as having been acquired, under section 39 of the Forestry Act 1967 (power to acquire land which is suitable for afforestation or purposes connected with forestry).””
Baroness Verma
“(4A) A person (“L”) who owns land (the “relevant land”) is not liable, as the owner of that land, in tort or delict for any loss or damage which is attributable to the exercise, or proposed exercise, of the right of use by another person (whether in relation to the relevant land or any other land).
(4B) For that purpose, loss or damage is not attributable to the exercise, or proposed exercise, of the right of use (in particular) if, or to the extent that, the loss or damage is attributable to a deliberate omission by L.
(4C) There is a “deliberate omission by L” if L, as owner of the relevant land, decides—
(a) not to do an act, or(b) not to allow another person to do an act,and the circumstances at the time of that decision were such that L would not have had to bear any of the costs incurred (whether by L or any other person) in doing or allowing the act.”
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, the UK stands to benefit enormously from the safe and effective development of the offshore shale gas and oil and geothermal industries. The Government have introduced provisions into the Infrastructure Bill which provide a right to use deep-level land 300 metres or more below the surface for the purposes of exploiting petroleum or deep geothermal energy.
I explained on Report that I had listened to the concerns expressed by stakeholders and by noble Lords that the right to use deep-level land could disadvantage landowners if claims were brought against them in connection with petroleum or deep geothermal operations. While the existing regulatory regime is robust, I agree that we can do more to reassure landowners. We need to be clear that these sorts of claims—brought by a third party against a landowner whose land is accessed through the right of use clauses—cannot be made against a landowner who has done nothing wrong. To this end, I committed to table an amendment to address this issue.
The amendment will provide protection for landowners against claims made by third parties for any loss or damage caused by the exercise of the right of use provision. It does, however, ensure that landowners—including persons with an interest in land, such as persons licensing the land—will not benefit from the exemption if they deliberately fail to act, or decide not to allow someone else to act. To make this fair to landowners, we also propose that a landowner would not have to do anything that would ultimately involve them in bearing any costs. This means, for example, that if a landowner prevented an operator from accessing his land to remediate any damage caused, despite the landowner not having to bear any costs, that landowner could be deemed liable. If, by contrast, the landowner allowed for the damage to be remediated, this amendment ensures that, as well as benefiting from existing protections, the landowner would not be liable to claims from any third parties for loss or damage.
This amendment will complement the existing comprehensive statutory and regulatory regime by protecting landowners, while allowing this source of home-grown energy to develop in a way that is fair to communities. I beg to move.
Lord Teverson (LD)
My Lords, I thank the Minister for having explained that amendment. I must admit that, when I went through it, I was not at all clear what it was trying to get at. I wondered whether this mystery person “L” would be listening to the debate or appearing in it. We have a number of such letters in this Bill.
My noble friend Lady Kramer has already thanked a number of people. I am not sure whether I am in the right area to do this but I want particularly to thank my noble friend Lady Verma for the work that she has done on this Bill. It has gone through everything from community energy to fracking to this whole area of oil. It has been a pleasure to work with her. We have our disagreements more in DCLG areas rather than here, but the Bill when enacted will make a number of things in the area of energy much better.
I also thank my noble friend Lady Kramer for guiding a Bill through the House when only about 10% included her departmental responsibilities. She has been present for a lot of our proceedings even when matters far from her department’s responsibilities were involved. Of course, I support the amendment.
Lord Jenkin of Roding
My Lords, while agreeing with everything that my noble friend Lord Teverson said, I would like to make particular mention of my noble friend Lady Verma’s readiness to listen to the arguments on Part 4 concerning the community electricity right. The concession that the Government made on the timing of the power to introduce regulations has been widely welcomed by the renewables industry. It was very wise, and I was extremely grateful when my noble friend signalled that there would be an amendment on Report; I said so at the time.
I, too, thank both Ministers for their part in the Bill and, in his absence, my noble friend Lord Ahmad, who played quite a notable part in the whole question of planning and other responsibilities that fell to his department. I also echo what was said earlier by my noble friend Lady Kramer about the Bill team. They have been extraordinarily helpful. I do not mind at all if, when one raises a point at a private meeting, one receives a very good explanation from one of my noble friends’ staff. Although it is always nice to get letters from one’s noble friends who are Ministers, to have such an authoritative statement from an official is equally helpful, and I thank them very much for that.
This has been a remarkable example of the House of Lords at its best in its role of scrutinising and revising legislation. There are still one or two issues which are not fully resolved, but it is with some relief that we will send the Bill to another place where, perhaps, they can be aired again.
As many noble Lords will have learnt, it is my intention to retire from the House shortly, and I am making it clear to anyone who cares that this will be the last Bill on which I will take an active part. I have enormously valued the opportunity to do that, and I look forward to what is now being called the valedictory speech—which is not today, it will come later—that retiring Peers will be entitled to make under the provisions of the report of the Procedure Committee. I have enjoyed it; I think we really have made a difference; and I think that that is what this House is for.
Lord Davies of Oldham
My Lords, as the House is in congratulatory mood, I briefly congratulate the noble Lord, Lord Jenkin. I first met his formidable intellect, advantages and knowledge on energy Bills a decade or so ago, when we went through a very long energy Bill. From what I can recall, he was present for virtually every minute of a Bill that went through 13 days or so in Committee, to say nothing of the extensive consideration elsewhere. Others will have the chance to congratulate him later, but with regard to this Bill, he has displayed his usual insight and talent to improve the legislation. I also, of course, second his point about congratulating the noble Baroness, Lady Verma, and the Bill team—although I may say that they have only started the long road. I predict challenges yet to come on all parts of the Bill but in the area of fracking, I think that they will have quite an interesting time in the other place.
Baroness Verma
My Lords, I am extremely grateful to all noble Lords for their participation in our proceedings on this Bill, particularly our discussions outside the Chamber, which have been very helpful. I end by thanking my noble friend Lord Jenkin for being there throughout all the energy Bills that I have worked on. He has provided a stream of information and expertise, and I have learnt a great deal from him in the past two and a half years at the Department of Energy and Climate Change. I wish him well. His forensic examination of legislation has made us all realise that this House has such excellence to offer that we should never underestimate the expertise among those who sit here.
Baroness Kramer
“(1A) A statutory instrument which contains an order under section 1—
(a) appointing a strategic highways company for an area other than the whole of England, and(b) which is the first exercise of the power in respect of such an area,may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(1B) A statutory instrument which contains an order under section 1—
(a) appointing a strategic highways company for an area other than the whole of England, and(b) which is a subsequent exercise of the power in respect of such an area,is subject to annulment in pursuance of a resolution of either House of Parliament.”
Baroness Kramer
My Lords, I owe the most extraordinary thanks to two of the most brilliant colleagues, the noble Baroness, Lady Verma, and the noble Lord, Lord Ahmad. I also regret the fact that, sadly, the noble Lord, Lord Jenkin, may not be here again on another Bill. We shall desperately miss him. I beg to move the privilege amendment.
Consumer Rights Bill
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text
16:34 - Division on Amendment 1 - Ayes: 176 / Noes: 244 - Amendment 1 disagreed.
18:50 - Division on Amendment 13 - Ayes: 183 / Noes: 171 - Amendment 13 agreed.
“Consumer credit: bill of sale
(1) Where a person is a purchaser of goods subject to a bill of sale, made in connection with a regulated agreement under the Consumer Credit Act 1974, in good faith and without notice of the bill of sale, title to those goods shall pass to that person.
(2) A creditor is not entitled to enforce a bill of sale made in connection with a regulated agreement by recovering possession of the goods except through an order of the court.
(3) If goods are recovered by the creditor in contravention of subsection (2)—
(a) the bill of sale will be treated as invalidly made; and(b) the debtor shall be released from any outstanding liability under the regulated agreement.(4) If the creditor has disposed of goods taken in contravention of subsection (2), the debtor shall be compensated to the value of those goods.”
Lord Stevenson of Balmacara (Lab)
The amendment stands in my name and that of my noble friend Lady Hayter of Kentish Town. I declare my interest as retiring chair of the charity StepChange. Your Lordships’ House will be well aware of the considerable influence that it has had in curbing the explosion of high-cost credit that has so disadvantaged consumers in recent years. However, there is more to do.
The purpose of the amendment is to level the playing field on logbook loans by requiring the lender to obtain a court order before repossessing goods being repossessed by this archaic system, which uses legislation first introduced in 1878. A logbook loan is a bill of sale securing a loan on an asset, often a vehicle, and it gets its name from the fact that the lender retains the vehicle’s logbook or vehicle registration certificate, the V54, until the loan and any outstanding interest are repaid. Logbook loans are another form of very high-interest credit, and share with payday loans the use of unfair terms and conditions. They tend to be used by people who have bad credit ratings but need cash quickly. If you check them out on the internet you will find that an application for a logbook loan can be completed in as little as 15 minutes.
Recent research shows that logbook loans secured by a bill of sale are generally for amounts ranging from £500 to £2,000; the average is about £1,000. They are typically repaid over a six to 18-month period. The APR varies, but tends to range between 200% and 500%. These are not cheap loans.
It is the use of a bill of sale that causes the most difficulty. The legislation governing such loans, which dates from Victorian times, means that, uniquely in the high cost credit market, the lender can repossess the debtor’s asset—the vehicle—without a court order. We need to change this, to level the playing field. Bills of sale are already illegal in Scotland. Should we not take a leaf out of its book?
The history of this is interesting. After reviewing the position in December 2009, the previous Government proposed to ban the use of bills of sale for consumer lending, but, after the election, the coalition Government decided not to go ahead but to rely on a voluntary code of practice. Recent research by Citizens Advice shows that there is likely to be a 60% increase in bills for sale registered from 2011 to 2014. We believe that it is now time to stamp out this arcane practice. The Victorians had much to commend them but this legislation is not their finest monument.
When we raised this issue in Committee, the Government response was twofold. First, the Minister confirmed that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform bills of sale. This is indeed somewhat ironic, given that we had a debate only yesterday on Schedule 20 to the Deregulation Bill, when the Government were rather limply trying to defend their decision not to ask the Law Commission to review acres of what they call “legislation no longer of practical use”. However, this process will take time and unless the noble Baroness has some more information to share with us, it seems highly likely that this issue will not get into the next Law Commission Bill, which is unfortunately not due until 2016. The Government also pointed out that the FCA is in charge of this sector of consumer credit and mentioned that it had defined logbook loans as “higher risk activities”. That is certainly not wrong but when, oh when, will they get around to doing something about it?
As we found with payday lenders, it does no harm to give the regulator a bit of a push when you think that it may not get to the right place quickly enough. Consumer detriment is happening now and it ought to be stopped, so our amendment follows the approach that the House took to capping payday lending, as a sort of regulatory push. As well as welcoming the promised robust action by the FCA, we think it is appropriate to hasten it on its way. If loan book lenders have to use the courts to repossess goods, it will level the playing field with the other consumer credit operators and make it more likely that many will exit the market. That would be “job done”. I do not believe that the actions being proposed by the Government are sufficient to outlaw this scourge in good enough time. Our amendment will strengthen protections for consumers using logbook loans. I beg to move.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, before turning to Amendment 1 in detail, I would like to take a step back and set out why the Government do not believe that this Bill should be the vehicle for addressing issues in consumer credit and financial services more generally.
First, as noble Lords will be aware, the Government have introduced a major package of reforms to strengthen regulation of financial services markets. In the Financial Services Act 2012, we replaced the flawed system of financial regulation that we had inherited. We created the Prudential Regulation Authority to take the lead in ensuring that our banks and our insurers are safely and soundly run. We also set up the Financial Conduct Authority—FCA—as a consumer protection and market conduct regulator.
To ensure that the FCA has a clear and comprehensive remit covering all consumer financial services matters, we transferred the responsibility for regulating consumer credit from the OFT to the FCA. This means that the FCA’s statutory objectives, such as consumer protection, apply to the regulation of consumer credit. It also means that the FCA’s comprehensive and flexible rule-making powers can be used to help protect consumers from bad practices in the consumer credit market for the first time. For example, the payday lending rules introduced by the FCA have meant that the volume of payday loans has shrunk by 35% since the FCA took over regulatory responsibility in April 2014, demonstrating the strength of the regulatory regime. The Government therefore consider that the Consumer Rights Bill is not the place for making amendments to the law on consumer credit.
I turn to the detail of the amendment. Across government, we share concern about the risk to consumers from logbook loans, which were well described by the noble Lord, Lord Stevenson. The Government believe that people should be able to borrow and should have the tools to make an informed decision about which credit products are right for them but that consumers should be confident that they will be treated fairly when things go wrong. As I have said, responsibility for consumer credit regulation, which includes logbook lenders and the associated arrangements, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime.
Like payday loans, the FCA defines logbook loans as “higher risk activities”, as has been said, so lenders face closer supervision. Logbook lenders are subject to a range of binding FCA rules, including requirements to provide precontractual explanation to borrowers of their rights before any agreement is signed. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for that very full and positive response. I am glad that she reaffirmed that the FCA is doing all it can in this matter and that the Law Commission, even at its somewhat leisurely pace, is going to be moving in on this area. Clearly the field is moving, and that is a good thing, but is it not the case that although the FCA can do all it can about companies, their balance sheets, their terms of trade and their operations, it does not have the power to make primary legislation, so it therefore cannot abolish bills of sale, nor can it require that any lending agreements should introduce court orders? We have a gap, a lacuna, between now and when the system kicks in, during which time the playing field is not level, the lack of a court order creates a significant imbalance between the consumer and the lender, consumers have fewer rights, and logbook loans will continue to cause severe consumer detriment. It is time to act. I wish to test the option of the House.
Baroness Jolly
Baroness Jolly (LD)
My Lords, the Bill’s provisions on consumer contracts for goods build on existing legislation, such as the Sale of Goods Act, and on court- developed common law. Government Amendments 2, 4 and 6 are to ensure that the greater clarity the Bill provides does not override an existing common-law distinction between severable and entire contracts. A severable contract is divisible into parts, which are intended to be independent of each other, so different parts of the payment can be assigned to different parts of the trader’s performance. The amendments make it clear that, where a contract is severable, the consumer may have the right to reject those faulty goods or they may have the right to terminate the whole contract. That will depend on the nature of the goods and the fault and the details of the contract. In some cases, it will be quite right for a consumer to reject all the goods under a contract, even if it is severable. The existing common law recognises that and the amendments are to make it clear that the common law on this applies.
The noble Baroness, Lady Hayter, asked in Grand Committee whether these amendments could create a new incentive for traders to try to make their contracts severable. I hope I have given reassurance that the amendments refer to an existing concept. A contract will not be severable simply because it is described as such but will depend on the genuine agreement and arrangement between the parties in the circumstances. The guidance to the Bill will cover when a contract is severable and when a consumer might be entitled to terminate the whole contract. As I have explained, these amendments are to ensure that the consumer’s clearer rights in Clause 20 should not override the common-law position for severable contracts.
Clause 20 reflects the equivalent provision for Scotland in the Sale of Goods Act—that is, Section 15B—and in related legislation. Therefore, for Scots law, Clause 20 is intended to restate the existing provisions without altering the common law. I beg to move.
Baroness Hayter of Kentish Town (Lab)
I thank the Minister for agreeing to give us some extra time to look at these amendments, which of course were not seen in the Commons or in the Select Committee. Having had time to consider them, and in particular with the reassurance that has now been given by the Minister and the clarity that will be in the forthcoming guidance on the Bill, we are content with the amendments.
Baroness Jolly
“(7A) Whether or not the consumer has a duty to return the rejected goods, the trader must bear any reasonable costs of returning them, other than any costs incurred by the consumer in returning the goods in person to the place where the consumer took physical possession of them.”
Baroness Jolly
My Lords, the Bill sets out key remedies for consumers but the Government recognise that it is also important that consumers are not discouraged from exercising them. These amendments relate to the costs of returning rejected goods to the trader. It is important that such costs do not put consumers off rejecting goods. We debated this issue at some length in Grand Committee.
We listened to the point made by the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, and agree that it does make sense to make it clear on the face of the Bill that the trader bears responsibility for the return costs. These two amendments provide that clarity and set a sensible balance. The trader is responsible for any reasonable costs of the consumer returning rejected goods. This would apply whether or not there is an agreed requirement for the consumer to return rejected goods. The amendments do not cover the costs of the consumer returning the goods in person to the place where the consumer took physical possession of them. We think that these are sensible amendments that meet the needs of consumers by making the law clearer without a causing significant burden to business. I beg to move.
Lord Stevenson of Balmacara
My Lords, I am extremely grateful to the Minister for accepting the words that we used when we proposed the amendment the first time around. It does not happen very often; I will relish this experience. It is a curious irony that, in Committee, in the place where I had to sit in the Moses Room—I am sorry to take up the time of the Chamber in this way—the Minister responding was framed against the television on which, as noble Lords may now remember, those little swinging bells had just been introduced. It struck me that it was Christmas: it felt like Christmas. However, her words did not say, “Christmas”; they said, “No, go away; this is silly; this is already in legislation”. Now she has changed her mind and come back. I am so pleased.
Baroness Neville-Rolfe
“(19) Subsection (20) qualifies the application in relation to England and Wales and Northern Ireland of the rights mentioned in subsections (1) to (3) where—
(a) the contract is a severable contract, (b) in relation to the final right to reject, the contract is a contract for the hire of goods, a hire-purchase agreement or a contract for transfer of goods, and(c) section 26(3) does not apply.(20) The consumer is entitled, depending on the terms of the contract and the circumstances of the case—
(a) to reject the goods to which a severable obligation relates and treat that obligation as at an end (so that the entitlement to a refund relates only to what the consumer paid or transferred in relation to that obligation), or(b) to exercise any of the rights mentioned in subsections (1) to (3) in respect of the whole contract.”
Baroness Neville-Rolfe
“(7A) Whether or not the consumer has a duty to return the rejected goods, the trader must bear any reasonable costs of returning them, other than any costs incurred by the consumer in returning those goods in person to the place where the consumer took physical possession of them.”
“(12) Where section 20(20)(a) applies the reference in subsection (1) to the consumer treating the contract as at an end is to be read as a reference to the consumer treating the severable obligation as at an end.”
Lord Clement-Jones
(a) ”
Lord Clement-Jones (LD)
My Lords, I was clearly sitting in the wrong place in Grand Committee, because I did not see any Christmas bells, and that is why I am returning to the fray on Clause 23 on behalf of the motor industry.
The amendment today differs from Amendments 20A and 20B, which were tabled in Grand Committee, by the addition of a new proposed subsection (9). This additional subsection would set a time period for completion of the process of repair to give the repairer the opportunity of a further attempt or attempts at repair. This directly addresses the concerns voiced by the Minister, my noble friend Lady Jolly, and, indeed, the Opposition Front Bench. My noble friend said in Grand Committee:
“The Bill is clear that a repair is an attempt to bring the goods into compliance with the Bill’s requirements. One repair is complete once the trader returns the goods to the consumer in response to the consumer’s request for a repair”.—[Official Report, 15/10/ 14; col. GC 118.]
For the Opposition, the noble Baroness, Lady Hayter, acknowledged that the repair need not be done “in one go”.
The purpose of this amendment is to clarify “one repair” in law, permitting a process of repair to take place. This is to address concerns from industry that the Bill as currently drafted does not provide traders of complex consumer goods, such as motor vehicles, a fair opportunity to repair. This is an issue because complex products may show a fault that requires more than one repair, involving, for example, more than one visit to a garage so that a car’s fault can be diagnosed and tested, and causes ruled out. In addition, a repair may appear complete, but the fault may reappear—as can be the case with electrical faults—and a second or subsequent repair may fix the problem.
My previous amendment regarding this issue, moved and withdrawn in Committee, met with concerns from my noble friend as it was thought that the consumer could become locked in a never-ending cycle of repairs. This revised amendment addresses this very issue while still giving scope for a process of repair to take place. This is through the addition of a determinable end-point for the process of repair, which would be commenced on the occasion that the consumer had to return to the trader for a second attempt at the repair. At that point, the trader would have to complete the process of repair within the requisite time, to be set down by the Secretary of State.
Viscount Simon (Lab)
My Lords, it had been my intention to speak. However, I, too, have been briefed by the SMMT, so I shall not repeat what the noble Lord has spoken about.
Viscount Younger of Leckie (Con)
My Lords, my noble friend Lord Clement-Jones makes an interesting point about extending the law to allow multiple repairs beyond repair one but within a defined period of time. It is still not entirely clear what this time period would be. I noted that he said that it would be a determinate end-point of repair.
It is a laudable proposition but for the fact that it could put undue cost burdens on small businesses. I give the example of a local business selling a complex piece of machinery. It comes in for repair once and then on a couple of other occasions before it dawns on the trader that the repair is as a result of the customer perhaps not using it properly or misusing it. However, up until this point, it is the trader who by law, under my noble friend’s amendment, would bear all the costs of the transport and the re-repair.
Therefore, although the trader could make the sale contractual to pre-empt or prevent this, I believe that it is more proportionate and less prescriptive to retain the one-repair proposal as laid down in the Bill.
Baroness Neville-Rolfe
My Lords, following the discussion my noble friend Lord Clement-Jones described in Grand Committee, I recently met representatives of the motor industry to discuss their concerns about the issue of one repair and we had a constructive discussion that included other amendments. I am very pleased also to hear from the noble Viscount, Lord Simon, about his discussions with the motor industry and, of course, to see my esteemed predecessor, my noble friend Lord Younger, making a very good point about the costs on traders.
I understand—although I am not a huge fan of motor cars—that motor vehicles are very complex goods and there can be a tendency for faults to reappear after repair. However, a limit of one mandatory repair or replacement sets an important and appropriate balance. The Bill provides key simplifications, as we all know, which we expect to benefit both consumers and traders, including the motor industry. The Bill sets a 30-day period for consumers to exercise the short-term right to reject, whereas in the past, claims have been made in relation to motor vehicles some months after the car was bought. The amendments we have laid on deduction for use, which my noble friend Lord Clement-Jones referred to, recognise the particular nature of motor vehicles, being complex and subject to rapid depreciation. He also noted in Grand Committee that the issue of one repair is pertinent to the final right to reject. I am grateful to my noble friend for going away and amending his amendment.
To the extent that the Bill’s provisions regarding one repair may impact on the motor industry, I think that being able to apply a deduction for use in the first six months mitigates against that and is an important and complementary protection. I am not blind to the needs of the industry, but the revised amendments go too far. They would undermine both the consumer protection and the clarity that the Bill provides. The limit of one mandatory repair or replacement before a consumer is entitled to some money back follows consultation by both the Law Commission and BIS, both of which identified that approach as being the preferred option. The Law Commission recommended that there should be greater clarity as to when a consumer can move from repair or replacement to access some money back. The Bill’s one repair or replacement provision gives that clarity and I am concerned that it should not be undermined. Importantly, the Bill does not prevent the consumer from agreeing to further repairs. I think consumers—certainly a consumer like myself—tend to act reasonably with a motor trader, especially if they are treated reasonably in return. As long as the trader keeps them well informed I think most people would be willing to accept further repairs. If, however, the relationship breaks down, the consumer should, and will under the Bill, have the right to exit the contract if the trader has tried and failed to fix the fault.
I also feel that a time limit set by the power included in the amendment would fail to provide the necessary safeguard to protect the consumer fully. There is a real risk that such a time limit would become the default, leaving consumers stuck waiting. Without the certainty of being able to ask for money back after one failed repair, consumers would have to show that a repair process had caused them significant inconvenience or taken more than a reasonable time. While these are important protections within the Bill, we do not think they are sufficient alone for goods. This was the very issue on which the Law Commission recommended that there should be further clarity. The evidence submitted to the Law Commission’s consultation showed that it is unclear when the point of significant inconvenience is reached, allowing considerable scope for dispute.
All of these concerns are compounded by the fact that these amendments are so broad in scope. We believe that as drafted they could apply to all goods, even a table that needed more than one repair. Essentially, the amendment seems to cover both complex faults in simple goods and simple faults in complex goods. It would be unclear whether or not the consumer had to make the goods available to the trader more than once. It would also be all too easy for an unscrupulous trader to argue for repeated repairs—even on simple non-complex goods if they claimed that the nature of the fault justified it.
My noble friend mentioned guidance and perhaps, without commitment, I can come back to him on that issue.
Lord Clement-Jones
Perhaps I can interrupt my noble friend to see what her reaction is before I respond. Does she accept that there is a conflict between what Ministers have been saying about the one repair concept and what is in the guidance? If so, clearly she could go further in undertaking that the guidance should be revised.
Baroness Neville-Rolfe
My advice is that there is no conflict, but as my noble friend has raised the issue, I shall certainly take a look and write to him. The amendments cut across the simple, clear provision set out in the Bill, so I ask my noble friend to withdraw his amendment.
Lord Clement-Jones
I detect in a mild kind of a way that that is a no—a fairly firm no. The motor industry will be very disappointed by that response, and I thank the noble Viscount, Lord Simon, for his support. I am somewhat surprised by the noble Viscount, Lord Younger, because this amendment is heavily supported by dealers and manufacturers. It is designed for their benefit; it is certainly not designed to add to their woes, which I believe Clause 23 has the capacity to do. It will bear unduly harshly on dealers, in particular, but I recognise a stone wall when I see one. I very much hope that my noble friend will undertake to review the guidance on page 39 and the conflict between what on the face of it seems to be a completely contrary statement to what is in the guidance. Perhaps we can make progress in that respect. In the mean time I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town (Lab)
My Lords, I rise to move the amendment in my name and that of my noble friend Lord Stevenson of Balmacara, and to speak in support of others in this group. We will not be pushing our amendment to a vote as what it proposes and what our Amendment 21 in Committee asked for is now almost completely achieved in the Government’s Amendments 10 and 12. While it remains the case that a car salesman can deduct some of the price of a new car when taking back a faulty vehicle in accordance with its second-hand value, we are delighted that this will not apply to other faulty goods, which was our concern, and which the Bill’s original wording would have allowed.
I thank the Minister—there is a lot of that going on today—for considering so carefully our case made in Committee and for accepting perhaps 70% of it. It is a sort of advent present rather than a Christmas present but we are delighted with it all the same. I beg to move.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness, Lady Hayter, for her kind words and acceptance of my amendment. I thank her for not wishing to press her amendment.
Baroness Hayter of Kentish Town
I thank the Minister for clarifying that she will be supporting Amendment 11 in my name, to which she has added her name, and moving her own Amendments 10 and 12, as we get to them. We will move our Amendment 11 in its place. I know that the Minister has put her name to it, but I think she will probably be moving Amendments 10 and 12 in their place. For the moment, I beg leave to withdraw Amendment 9.
Baroness Neville-Rolfe
“(a) the goods consist of a motor vehicle, or(b) the goods are of a description specified by order made by the Secretary of State by statutory instrument.”
Baroness Neville-Rolfe
“(13) In subsection (10)(a) “motor vehicle”—
(a) in relation to Great Britain, has the same meaning as in the Road Traffic Act 1988 (see sections 185 to 194 of that Act);(b) in relation to Northern Ireland, has the same meaning as in the Road Traffic (Northern Ireland) Order 1995 (SI 1995/2994 (NI 18)) (see Parts I and V of that Order).(14) But a vehicle is not a motor vehicle for the purposes of subsection (10)(a) if it is constructed or adapted—
(a) for the use of a person suffering from some physical defect or disability, and(b) so that it may only be used by one such person at any one time.(15) An order under subsection (10)(b)—
(a) may be made only if the Secretary of State is satisfied that it is appropriate to do so because of significant detriment caused to traders as a result of the application of subsection (10) in relation to goods of the description specified by the order; (b) may contain transitional or transitory provision or savings.(16) No order may be made under subsection (10)(b) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.”
Lord Moynihan
“Secondary ticketing platforms: seller profiles and ticket information
(1) Secondary ticketing operators must, on the website on which tickets are offered for sale or transfer, provide information concerning the sellers of tickets so that sellers may be easily identified.
(2) Information provided by virtue of subsection (1) must include, but is not limited to—
(a) the name of the seller;(b) if the seller is an undertaking, its registered number, jurisdiction of registration, registered office address, and if registered outside the United Kingdom, a valid address for service; and(c) the VAT registration number of the seller, if applicable.(3) Information provided under subsection (1) must be—
(a) accurate; and(b) prominently displayed before a buyer is able to complete the purchase of the ticket.(4) Secondary ticketing operators must disclose clearly and prominently where the seller of a ticket is—
(a) the secondary ticketing platform or a subsidiary undertaking or parent undertaking of the secondary ticketing platform;(b) a person or persons employed or engaged by the secondary ticketing platform;(c) other persons connected to employees, directors or shareholders of the secondary ticketing platform, or any of its subsidiary undertakings or parent undertakings;(d) the event organiser or an agent acting on its behalf;(e) any other party connected to the organisation of the event.(5) Where a ticket is offered for sale or transfer through a secondary ticketing platform—
(a) the seller must provide all relevant information about the ticket;(b) the secondary ticketing operator must publish all relevant information about a ticket in a prominent and clear manner; and(c) the secondary ticket operator must immediately remove the ticket from sale when it is informed by the event organiser that the information provided is inaccurate or incomplete.(6) Information to be provided by the seller and published by the secondary ticketing operator for the purposes of subsection (1) must include, without limitation—
(a) the face value of the ticket;(b) any age or other restrictions on the user of the ticket;(c) the designated location of the ticket including the stand, the block, the row and the seat number of the ticket, where applicable; and(d) the ticket booking identification or reference number.(7) Where tickets are being resold in contravention of the terms and conditions agreed to by the original purchaser, this must be stated prominently by the secondary ticketing platform at every stage of the purchasing process.
(8) Information provided by virtue of this section must be—
(a) accurate; and(b) prominently displayed before a buyer is able to complete the purchase of that ticket.(9) For the purposes of this section—
“secondary ticketing platform” means an internet-based facility for the resale of tickets to events in the United Kingdom of Great Britain and Northern Ireland, regardless of the jurisdiction in which the owner of the service is registered;
“secondary ticketing operator” means, in relation to a secondary ticketing platform, the person (whether incorporated or not) operating that secondary ticketing platform;
“ticket” means anything which purports to be a ticket, including any item, tangible or intangible, which grants the holder the right to entry to an event;
“event” means any sporting, music or cultural activity taking place at a specified time and place for which tickets are issued and required for entry or attendance;
“event organiser” means the person responsible for organising and holding an event and receiving the revenue from the event;
the term “undertaking” has the meanings given in section 1161 of the Companies Act 2006 (meaning of “undertaking” and related expressions);
the terms “subsidiary undertaking” and “parent undertaking” have the meanings given in section 1162 of the Companies Act 2006 (parent and subsidiary undertakings);
the term “person” refers to a natural person or a body corporate.
(10) This section will come into force no later than six months after this Act is passed.”
Lord Moynihan (Con)
My Lords, I am grateful to the Minister for the time that she has devoted to this issue. She shares the passion for sport and the arts of the movers of the amendment and has spent many hours with the governing bodies of sport, as well as event promoters and colleagues hearing our case. Before I speak to the amendment, I will set out the scale of the problem and then address the current legislation, which I will argue has been proven to be ineffective. I will then explain the rationale for this amendment. At all stages, I will draw on the position taken by the Minister at Second Reading and in Committee and look to match the arguments so e1oquently made then by my noble friends Lord Clement-Jones and Lady Heyhoe Flint, the noble Lord, Lord Pendry, the noble Baroness, Lady Grey-Thompson, and the noble Lord, Lord Stevenson.
The size of the problem is well documented. I refer the House to an extract from the National Fraud Authority’s Annual Fraud Indicator of 2013—the National Fraud Authority was then the executive agency funded by the Home Office. The report states:
“Online ticket fraud £1.5 billion … Online ticket fraud occurs when victims purchase tickets for an event such as music, sport, theatre or a performance, which do not materialise. These tickets are often purchased from fake ticketing websites and through online auction and shopping sites … Research carried out by the OFT in September 2009”—
three years after the passing of the Fraud Act, which was meant to deal with these issues—
“identified that 1 in 12 of those surveyed admitted to being caught by scam websites. The survey also showed that about eight per cent were a victim of online ticketing fraud, having bought music, sport or theatre tickets from a website that appeared to be genuine … The NFA has calculated an annual fraud loss estimate using the prevalence rate identified in the OFT survey multiplied by an average fraud loss of £637 per victim identified by Action Fraud in relation to online ticketing fraud during 2012 … Based on this data, an estimated 2.3 million people fall victim to this type of fraud each year, resulting in losses of £1.5 billion”.
The Government are on record as saying that this is not a major issue. I would argue that £1.5 billion lost to consumers is a major issue requiring urgent action.
One can look simply at the evidence of the past 12 months and take some random examples. On 23 February last year, 80 people arrived excitedly at the O2 Arena to see One Direction only to find out that the tickets they were holding were not going to let them in. Of the 80 tickets, 40 were sold through viagogo. The next biggest source was Seatwave and the rest were bought through GET ME IN! and eBay. In July last year, Stuart Cain, head of ticketing at Birmingham’s LG Arena said:
“On a big show where there are a lot of e-tickets you can get up to 100 people a night affected”.
In November 2012, fans of Mumford & Sons were left disappointed after the tickets they bought from controversial secondary ticketing seller viagogo for a gig in Portsmouth turned out to be fake. I am sure that noble Lords will have examples from their own experience of this serious issue.
I turn to current legislation. There was all-party support and agreement with the International Olympic Committee to deal with ticket touting for the 2012 Olympic Games. Under Section 31 of the London Olympic Games and Paralympic Games Act 2006, it was an offence to sell a ticket or anything that purported to be a ticket for an event held as part of the Olympics or Paralympics in a public place or in the course of a business without the written authorisation of LOCOG, the event managers. There was no secondary market and a fine up to level 5 on the standard scale—some £5,000—for anyone convicted of such an offence. With all-party support in both houses, we tackled the problem of ticket touting by making the secondary market illegal. In 2011, there was further legislation. The fine was upped by Parliament to £20,000, again, with all-party support and no requirement for this latter measure from the International Olympic Committee.
What were the lessons learnt from the Olympics on this subject? My noble friend Lord Clement-Jones reminded us in Committee that the Metropolitan Police did a lot of work and reported through Operation Podium after the Olympic Games the need for an open and transparent system for ticket reselling with clear and appropriate regulations. Secondary websites, the Met argued, should be required to publish details of the ticket being offered including the original face value, seat number and location. They should identify the seller, state whether the seller has the permission of the originator to resell the ticket and declare whether the tickets have been listed by the event organisers. That was the position of the Metropolitan Police. The All-Party Parliamentary Group on Ticket Abuse recommended amendments to the Bill along the lines of those before the House today.
Our amendment addresses the reselling of event tickets usually, but not always, for profit. It specifically does not pursue the route followed, with all-party support, for London 2012; namely, the criminalisation of the secondary market while leaving the primary market completely unregulated. I believe that we need a secondary market. Everyone speaking to the subject in Committee emphasised the importance of an effective secondary market. There are often prima facie reasons why a “real fan” may feel the need to pass on a ticket. That includes the obvious scenario of when the purchaser has a spare ticket for which they cannot get a refund and so have no option other than to sell the ticket on the secondary market to recoup their expenditure. The Minister states that the consumers are protected by the Fraud Act 2006 and the Government have issued guidance on the 2013 regulations, specifically on tickets.
The Minister is also concerned that we would be regulating consumers. I agree with the Minister and would be the first to resist obtrusive consumer regulation. While it is wholly appropriate for, let us say, health and safety, it would not be here. That is why we propose, as your Lordships will have read, an amendment with a very light-touch approach which all genuine consumers should welcome for the transparency and empowerment that it would give them.
Just four, short, key facts are required. All that is now proposed is the name and location of the tickets and/or booking number, together with a tick box of whether resale complies with the terms and conditions. This takes about 15 seconds to type in—fractions of the time compared with what we have to go through to establish our profiles and register with a secondary selling site—but it gives the consumer the information he or she needs to check the validity of the ticket. Of course, it will not completely cease counterfeit activity but professional event organisers and all the sports governing bodies widely agree that this information will substantially reduce fraudulent activity in the £1.5 billion industry that is so damaging to consumers.
Having reviewed the Minister’s contribution to the early stages of the Bill, I believe that the Government may be unclear as to the distinction between a trader and a consumer. Surely anyone selling their £50 ticket for £500 on a website is no longer a consumer; they are automatically defined in law as a trader. It is not, as we have been told, relegislating. At present the information required in the regulations is only for traders and is only set out in guidance, not in the Bill. As I shall demonstrate, it is woolly, to say the least, and it is easily avoided. A review of thousands of tickets today on the online sites shows none complying with 2013 regulations. No one who has put their name to this amendment seeks to abolish the secondary market. We all seek to improve its operation in the interests of consumers, placing key best practice obligations in the Government’s 2013 regulations on the face of this consumer legislation.
I turn to the regulations on which the Government rely. I regret to say that you can drive a coach and horses through them. The fact that there is a £1.5 billion fraud market demonstrates that this is the case. As I have mentioned, the regulations apply only to sellers, who are defined as traders, and not to consumers selling to other consumers, as happens so often and is the business model for the secondary ticketing sites. Schedule 2 to the regulations lists the information you must provide to the consumer. Information on the main characteristics of the tickets and their total price, including delivery costs and other charges, must be given in a clear and comprehensible way before the consumer purchases the ticket. The main characteristics include—and here are the four key words, “if known to you”—the date and time of the event and its content; for example, who is performing. For a ticket associated with a particular reserved seat—say row A, seat 1—the seat number is a main characteristic that should be given to the consumer—if you know it. You do not have to find it out; you simply put it on there if you know it. That is fine, if you know it but, “Sorry, guv, didn’t know the date; sorry, guv, didn’t know who was playing; sorry, guv, didn’t know which seat it was or where it was in the stadium”. “I didn’t know” is a let-out clause as wide as the Blackwall Tunnel and as congested, full of unscrupulous ticket resellers. That is why the 2013 regulations are ineffective, as witnessed by their inability to impact the market and, in practice, are as good as being voluntary. That is why we need to address the £1.5 billion market that exists today.
One of the strongest arguments against the position that my noble friend took in Committee is that all the amendment would largely do is enforce what is currently set out in the guidance. It removes the loopholes that I have just mentioned and makes sure that it applies to secondary selling sites. If the Government feel that the guidance is sensible and required, it must follow that the Government cannot object to making the key elements of the guidance enforceable.
The Government argue that regulation of the marketplace is not needed, as these regulations provide effective legislation and that, if we legislate today, we would most likely push sales back underground and away from these legitimate marketplaces. However, as we are proposing only that four key elements of the existing regulations already approved by the Government should now be in the Bill, I can deduce only that the Government must believe that, if the regulations were properly followed, we would push sales underground. In other words, they must have been introduced to be ineffective. If so, we can only congratulate the Government on achieving this objective.
Baroness Heyhoe Flint (Con)
My Lords, once again, I return to the subject I raised at Second Reading and in Committee by speaking to Amendment 13, to which I have added my name. I also have to declare an interest to the House: I am a board member of the England and Wales Cricket Board.
Like so many of my colleagues on both sides of the House, I want the very best for sport and entertainment and their fan bases. I make this address feeling a bit like Mrs Echo of my noble friend Lord Moynihan. As the House has heard, this is a redrafted amendment. It is shorter, sharper and has absolute clarity. It is designed to empower consumers by placing extremely light requirements on the reselling of tickets. Crucially, it does not in any way prohibit or ban the resale of tickets. It seeks to replicate the standards that the Government intended—I stress the word “intended”—to introduce through the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.
Frustratingly, the regulations are not working at all. I have now studied many online ticket sales sites, as have the major sports groups mentioned by my noble friend Lord Moynihan. We can find no sales at all complying with the stated regulations. In meetings with officials working for the Minister, they, too, have been unable to cite evidence of the consumer contracts regulations having any effect. The regulations are clearly ineffectual. That is why I plead from my sporting heart that we need the amendment. It clarifies matters by placing in legislation key characteristics that must be provided by the seller when a ticket is resold, rather than the existing vague guidance and confusion about what constitutes a trader and what constitutes a consumer. That creates a huge loophole that can be exploited by the unscrupulous leading to, as my noble friend Lord Moynihan said, a £1.5 billion racket.
I hope that all sides of the House will support me when I emphasise what we are trying to achieve. Those who buy a ticket from a secondary seller should be provided with the same information and protection when they buy that ticket as they would expect to receive when purchasing direct from the event organiser. It is as simple as that. But you would not think so, judging by the anguish that sports governing bodies are having to suffer in seeking a satisfactory resolution with this amendment.
If the amendment is made, every purchaser will be told the original face value of the ticket, the location of the seat in terms of block, row and seat number, whether it has restricted vision, and whether it is a seat for a child or senior citizen being sold at what I think is called a top-whack price. It will also allow people to check with the venue that the ticket is genuine. Importantly too, they would be told the original terms and conditions relating to the ticket purchase, and whether the resale was in breach of those original terms and conditions.
As has already been said, it takes only a matter of seconds to provide this information online. Remember that anyone who sells online has to create an account with a secondary seller or website in any event. This is an infinitely longer process than just providing three key details when selling a ticket. If you are extremely modern, you could even take a photo of the ticket and upload it.
Those facts are material for the consumer in making an informed decision about whether to purchase a ticket. I assure the House that this is not an unnecessary burden— and it would certainly not seem like a burden to the 150 or so very angry fans who were refused admission to the Ashes test at the Oval two years ago because they had been sold invalid tickets online. Club officials were angrily confronted, and are probably still recovering from the onslaught, but they had no armoury in legislation to solve the problem. In some circumstances there is no block, row or seat number. That is why the amendment offers the alternative of citing the seat booking reference number.
If the Government intend to continue to defend a status quo that is patently failing, I have three questions for the Minister. First, does she accept that the amendment, if accepted, would place very little burden on the seller? Secondly, why does the Minister not agree that is important to empower consumers by giving them key information about the tickets they have bought, and to protect them from being mis-sold or, even worse, turning up at the event and not being admitted because the terms and conditions have been breached? Thirdly, does she accept that the 2013 regulations are not working, because they rely on guidance alone and are too imprecise about how a trader is defined? Surely individuals who buy tickets with the sole aim of selling them on at inflated prices to make a profit are trading, so should be classed as traders.
I am sad to tell the House that there are very many people doing just that. Only yesterday I went online to research the issue. Across the sites of major secondary sellers such as viagogo, Get Me In!, Seatwave and StubHub—they have been vigorously lobbying against the amendment; well, they would, wouldn’t they?—I found more than 5,000 tickets being sold for next summer’s Ashes test series. This is flabbergasting. These tickets have only just gone on sale. It is inconceivable to me that such a large number of tickets have been bought by consumers who now find, eight months in advance, that they cannot go to the tests. How very strange and coincidental is that? These tickets are being hawked around for profit. Every single one of them is being sold in breach of the 2013 regulations, because they have been put there by opportunistic traders, colloquially known as touts; they are not put there just for fun, or by individual consumers exploiting the system. It is naive to think otherwise and to believe that those actions are acceptable.
Is this how we want to showcase our international sports and entertainment events in this country? Is this how we want to go about protecting a nation of sports fans? Before us is a Bill about consumer rights, so please let us give those consumers the right to know that what they are buying is genuine and is what it purports to be.
I have in the past been regarded as a rebel with a cause in fighting for fairness in sport. Speaking in support of this amendment, I am once again revealing my rebellious nature—old habits die hard—but I am merely seeking fair trading for all. I hope that the Minister is now ready to accept this amendment or at least prepared to offer some room for negotiation before Third Reading. The MCC’s “Spirit of Cricket” project, which engenders fair play, should be adopted for secondary selling of tickets so that all consumers are protected from those who seek to prey on their enthusiasm and desire to acquire genuine tickets.
Lord Clement-Jones
My Lords, as the third signatory to the amendment and as someone who tabled amendments in Grand Committee, in the face of the superb introductions by my noble friends Lord Moynihan and Lady Heyhoe Flint, I intend to be extremely brief. I bow to the knowledge, expertise and passion which they bring to the amendment today and I will simply emphasise four points.
First, this amendment is not intended to create a ban on secondary ticketing and would not do so in practice. It is not designed to inhibit the legitimate exchange of tickets on secondary platforms. The target of the amendment is those who are using the lack of transparency to mislead or defraud consumers; it will benefit all those wishing to buy tickets on the secondary market.
Secondly, as my noble friend Lord Moynihan said, some of our biggest national governing bodies of sport, such as the FA, the ECB, the RFU and the LTA—I am sorry about the initials but there are plenty of them—as well as the organisers of events such as Wimbledon, England 2015 and the London Marathon, are calling for this because they believe that their consumers, the sporting enthusiasts, are being harmed by the lack of transparency in the secondary market.
Thirdly, as has been very clearly illustrated, the current consumer contract regulations are too narrow and capture only traders. Yet no one selling on the secondary market identifies themselves as a trader. Furthermore, as my noble friend Lord Moynihan said, the obligation to list the main characteristics applies only if they are known. I thought that “Honest, guv” was an extremely good way of putting it. They can say, “I don’t know the characteristics or the ticket number”, and so on. The consumer contract regulations are pretty ineffective. It is quite clear that none of the main ticketing platforms has put anything additional on its website as a result of them, so in that sense they are completely ineffective. Of course, as my noble friend Lord Moynihan pointed out, there is a minimal amount in the regulations themselves; the rest is in the guidance, which is not binding.
Fourthly, my noble friend Lady Heyhoe Flint gave us a number of illustrations. There is a very recent illustration from the rock world with the Fleetwood Mac tour. Something like 12,000 tickets for that UK tour are available on the secondary websites. Have all those enthusiastic Fleetwood Mac fans really decided, having bought those tickets in the first place, to put them on the secondary market because they are washing their hair one day? That is a completely incredible scenario and it only illustrates the need for far greater transparency in the ticketing world. I very strongly support the amendment.
Lord Deben (Con)
My Lords, I declare a total lack of interest in the sense that I neither buy through the internet for sporting occasions nor for the sort of musical occasions of which we have heard involving various persons with attractive names. However, somebody ought to speak in this debate on behalf of normal customers, who do not happen to have a big enthusiasm for it. However, I do have an enthusiasm for honesty and straightforwardness and I start by saying that if it were good enough for the Olympics, why the blazes is it not good enough now? The Government do not have a case because if they needed to do that to protect Britain’s reputation for the Olympics, they need to do it to protect Britain’s reputation for every other sporting activity and the like. That is the first thing and it seems perfectly obvious.
Lord Stevenson of Balmacara
I am sorry to interrupt the noble Lord but I want to point out two things. First, the noble Lord spoke warmly about newspaper proprietors and what a wonderful thing it is that we have a rule in this country that editors should always be named so that they can be sued for libel. That has just been deregulated. Secondly, it was a Conservative Government who introduced the requirement to regulate chocolates.
Lord Deben
There may be regulations which, when people did not do it, you need. I think that if the Daily Telegraph took its address off, we would be able to find it. We would not be in too much difficulty with newspapers today. The problem here is that these websites are in the same position as newspapers were in those days, when there were a very large number of them, they were run off by hand and people did not know whence they came. I think that that explains the difference between now and then: the world changes and it moves quickly. I used the example of liqueur chocolates because it was always silly to have liqueur chocolates under the rules. I do not know which party proposed it, but whoever it was should be ashamed.
I finish with the real reason I wanted to stand up and talk about this. Britain is increasingly the centre of a very large tourist trade. London is the only world city, in a real sense. We have the glory of the most diverse society with the most wonderful opportunities. We should be saying, every day, “Thank goodness we live in this great country and in this great city”. Therefore, we must ensure that we protect the brand. I do not want to be vulgarly capitalist, but let us protect our brand.
I want us to be a major force in the European Union, where we are properly at home, but I want people coming from the rest of the European Union to feel that we protect them when they buy tickets here, when they buy them from abroad and when they come in from the EU and beyond—I want our American and Australian friends to feel that they can do this safely. The Government have a very simple way of doing this, which is to accept the amendment. I very much hope they will.
Lord Stoneham of Droxford (LD)
My Lords, in supporting the Government on this amendment I feel a bit like Pietersen, the cricketer, taking on the cricket establishment, but since I have always admired his bravery and foolhardiness, I shall have a go. I think there is a dangerous presumption in this debate that the secondary ticketing market is a bad thing and that people would like to do without it. Balancing that, I accept, there is a genuine belief that by increasing regulation, by demanding more information, we will eliminate fraud. I think that approach is misguided. I do not think that you necessarily end fraud by increasing regulation.
The secondary ticketing market fulfils a very useful purpose for people, particularly those who buy tickets and are often made to buy them a year ahead of the event. When they do not want to use them, they can dispose of them appropriately; 70% of people buying tickets want that secondary market to continue. We should be supporting recognised and established brand leaders that work in this market and do all that is required. They guarantee their tickets, and people should use them; we should encourage more people to use those established brands. If they did that, the market would work better; that is how to attack fraud.
If you are attacking fraud, where else do you look? You look first of all at the computer-operated systems that enable people to buy mass tickets. That is where you ought to direct your attacks, and there are some encouraging signs there. But you also need to question the sports operators. Too many of them are greedy. They give their tickets to people in hospitality, who then do not need them and try to dispose of them through secondary markets. If the sports operators want an improvement, the first thing that they could do is to improve the affordability of their tickets, so they are not forcing the price up, which encourages this sort of fraud.
Ticket sellers are already subject to the regulations, as we have heard. Is it a good Conservative or Liberal principle that, if the regulations are not working, you add to them? Surely you question them. Are we really saying that just adding a name to a ticket will eliminate fraud? I do not believe that either. We should encourage established secondary sellers, so that they can help us to undermine the bad sellers of tickets—the touts, if you like. Online selling and ticketing is actually a huge improvement in terms of control on the old idea whereby tickets were sold by street traders. So instead of having an emotional look at this issue—and I accept that there is a lot of emotion about it—we should look at it frankly and in great detail to see what we are doing here, rather than adding to regulation that is not working and not actually looking at the real areas where fraud is being perpetrated.
Viscount Younger of Leckie
My Lords, I agree with much of what the noble Lord, Lord Stoneham, has said. I was unable to be present for that part of Committee that focused on the emotive issue of secondary ticketing, but I have read Hansard, and my first point is that I have some sympathy in reading the anecdotes and anomalies raised, notably by the noble Lords, Lord Stevenson and Lord Clement-Jones, as well as my noble friends Lord Moynihan and Lady Heyhoe Flint, among others.
I admit that there is a range of frustrating issues over the sale and resale of secondary ticketing, which have been cited. I also note that the noble Lord, Lord Pendry, is in his place; he noted in Committee that these matters have been debated over 20 years, which shows that they are not easy. I was pleased to meet my noble friends Lady Heyhoe Flint and Lord Moynihan to discuss these matters, when in my role on the Front Bench, so I am aware of many of the issues.
I start by stating the obvious. As a principle, we should not legislate or regulate when either there is existing regulation in place—and I note the comments from my noble friend Lord Deben that that means good legislation—or there are solutions coming from the market. The question is whether safeguards are in place and whether they are being utilised. In the case of business-to-consumer sales of tickets, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out clearly as a list what information must be provided on tickets. There are more than 20 pieces of information requirements to which the consumer has access, and there is guidance for consumers on how to apply them to tickets. If there is a breach, the whereabouts of your seat is important—for example, if you are unexpectedly placed behind a pillar when you are watching a cricket match. Here you have redress under the Consumer Protection from Unfair Trading Regulations 2008. Other potential breaches can come under the Fraud Act, as mentioned today, as an offence. The sanctions including fines or imprisonment are in place. Given the comments of my noble friend Lady Heyhoe Flint about the law being ineffectual, I would however ask the Minister if it would not be a good idea to do more, such as better publicising the sanctions and advertising warning notices for those traders, or traders posing as consumers, who might be minded to commit such offences. Of course, more offenders caught will act as a deterrent—or should do.
Lord Borwick (Con)
My Lords, it is such a shame when a fan of sports, or theatre, or music, has their enthusiasm exploited, and is ripped off. But I do not think that the amendment would do what it intends to do. It is designed to allow sports grounds to cancel tickets not sold by them. When people hear of a secondary market, they think of shady touts selling fraudulent tickets on the street corner. They think of sportsmen, officials or media pundits who are offered freebies, and then choose to sell them at inflated prices. These things will not be stopped by this amendment. They are not what proper secondary markets are about.
A proper secondary market will allow people to trade tickets among one another; to allow supply to meet demand, with the market doing exactly what it is supposed to do—arriving at the right price for both parties. Using a safe secondary market on the internet is safer than using a tout. If someone were to purchase a ticket for an event, and closer to the time realised that they could not go, then it is only fair that they should try to find a buyer for the ticket. If information such as seat numbers, transaction numbers and the names of sellers is required for resale, then sports governing bodies or theatres could cancel the tickets without a refund. So the person who bought the ticket originally would be out of pocket. Then the incentive is there for sellers to lie about their name.
With this amendment, we will find that Mr D Duck is a top ticket dealer. Or the seller may even list an adjacent seat number. Imagine the problems that could be caused when the wrong seat is cancelled. If your ticket was cancelled because a tout said he was advertising it, you may eventually get a refund after a struggle—but you will certainly miss the show.
Someone hoping to sell a ticket could also just try to sell it on an offshore site—or indeed sell it to those malicious touts outside the venue, helping to fuel more fraudulent activity. However well intentioned, I think this is one of those laws that will make sensible people do silly things. People use secondary ticket markets quite happily as they currently operate. The majority of users want a safe space to resell tickets online. People are very concerned about privacy online too. They know that scammers are out there looking for personal information such as names and addresses. Asking for this level of information for an online secondary market will worry users.
When we hear about the astronomical prices quoted for a ticket, quite often in newspaper reports, they are usually just the advertised price. That does not mean the ticket will sell for that much. Buyers are as canny as sellers. They know that they can wait for a while, until the date of the show gets nearer, to see a drop in the price. Again, this is the market determining the right price between grown-up consumers. And why do we not celebrate high prices? Surely this just shows that the lucky fans who purchased at face value have got them themselves a bargain.
We have seen what it is like when there are no secondary ticketing markets in the UK. The Olympics were a success in so many ways, but it was disappointing to see banks of empty seats at many exciting events. It was a condition of our bid for the Games that there was no secondary market and the results spoke for themselves—empty seats. We should also look elsewhere to see if another country has introduced these kinds of regulations, and what the effect has been.
In France, the legislation seems to have had little impact, and has done exactly what I alluded to earlier—sellers have moved to selling tickets on offshore markets. Canada and states such as Michigan have introduced legislation like this, and then had to remove it. There is a thriving secondary ticket market elsewhere in America—for baseball games and American football matches. The prices are wildly different at times, and they simply reflect the demand for a ticket. You can get a ticket to a baseball match starting that same afternoon for less than $10. But a big football match is likely to be more expensive on the secondary market. Overall, though, transactions are safe and demand meets supply. We seem to be five years behind in considering legislation like this. So we should take this opportunity to make sure that we do not follow bad examples but copy good ones.
Baroness Crawley (Lab)
I rise briefly to prove that we on this side of the House can also have fun and go to concerts and rugby and football matches. I want to support those who tabled the amendment—obviously my noble friend has yet to speak. I believe that this is a very sensible but extremely light-touch proposal—it is feather light. We are not asking for criminalisation, as in the case of the Olympics. We are talking about the point that the noble Baroness, Lady Heyhoe Flint, made demanding equality of treatment for consumers of both original tickets and secondary tickets. That is a very simple demand to make in this extremely light-touch amendment.
Baroness Grey-Thompson (CB)
I support the noble Lord, Lord Moynihan. I have a number of interests in sport, which are declared on the register. We might be here a long time if I went through them all.
We have been discussing this for longer than I have been involved in sport—and that is at least 30 years. As an ex-athlete and a sports fan, of course I want people to be watching and supporting. It is important to say that this is not a ban on secondary tickets; it would not be so in practice. This is about those people who hide behind the lack of transparency to mislead or defraud.
We should not take lightly the number of governing bodies which are in agreement on this issue. Again, in the length of time I have been involved in sport, it is very unusual for so many to agree on a single issue. They believe in this because they feel that it is very harmful to what they are trying to do. This is a pragmatic step that empowers consumers. It will not inhibit the legitimate exchange of tickets on secondary platforms. It will just make government policy much more effective.
I would like to come back to the point of the noble Lord, Lord Borwick, on the Olympics and the Paralympics. It was briefly in the media about seats not being filled, but my understanding was that that was part of the contract with the IOC: it was IOC members who had to have those seats available if they wanted to watch the sport. It was not a case of tickets that had been sold and not used—it was a very specific area. Every Olympics and Paralympics Games have to set a number of those seats aside. I feel slightly embarrassed talking about that with the noble Lord, Lord Deighton, in the Chamber. He was much closer to it than I was.
With the Olympics and Paralympics, the legislation that was in place meant that people felt very confident, knowing that when they went to events they would get tickets. I have been to events where I have seen parents standing outside, explaining to their 10 year-old why the ticket they have is not valid. They might have paid over the odds for it, but the pressure from children to see One Direction and all those other people is huge. As a parent you might pay more, because you want to give that experience to your child. You do not spend lots of time checking out different methods of buying tickets on the internet; you buy the ticket because you want to be there. This is about protecting those people and making sure that they know that those seats are protected.
This is pragmatic. Nobody loses out from this proposal apart from those who seek to make huge profits by mis-selling or defrauding consumers. I strongly support the work that the noble Lord, Lord Moynihan, is doing in this area, because it is vital that we do this.
Lord Holmes of Richmond (Con)
My Lords, I will start with a couple of apologies. The first is for arriving a few seconds into the speech of my noble friend Lord Moynihan. That was partly to do with the excellent speed of the Minister in marshalling us through this, while simultaneously being due to a slight go-slow on the part of my guide dog in getting here this afternoon. I also apologise for not being able to speak to this amendment in Committee; it was my birthday, and I wrongly prioritised a celebratory dinner ahead of speaking on that occasion.
What are we trying to achieve with this? It is not complicated; it does not say anything negative about the concept of a secondary market for tickets. It is simply about this: if we can improve, we will get more tickets into the hands of more sports fans for more events, and we will drive a far more efficient ticketing operation across sport, art, culture and music.
In Committee, the noble Lord, Lord Stevenson, raised a very important point: what is a ticket? That question was not taken up by the Minister on that occasion, so I will tempt her this evening into perhaps going into it in her response, because it is a key point. If we are talking about tickets, it makes sense for us to consider what a ticket is, and crucially, off the back of that, it seems reasonable to consider what a ticket could and perhaps should be. That involves consideration of the physical, the electronic ticket, its commercial and legal characteristics, and what is set around it as regards transferability and negotiability. It seems to be quite sensible to think, debate and discuss all those elements so that we are all clear as regards what we are talking about.
If I am lucky enough to get a ticket for Centre Court at Wimbledon, but then a week before I am struck down with a late spring flu, it seems perfectly reasonable and absolutely right that I should be allowed to resell that ticket to somebody who was not lucky enough to get it in the primary sale. Similarly, it seems absolutely reasonable that I should not be able to make a profit on that ticket, and should be able to get back only its face value. Even more so, if from the outset I pitched into the ticket market with no intention of going anywhere near Centre Court and SW19, it seems absolutely reasonable that there should be no proper purpose in the deriving of profit from that purchase.
The ticket is not a piece of real property; it is a licence—an opportunity. It is the chance to sit on one of those hallowed seats at Centre Court, not something to put away and deal with as if it was some property that can be sold to the highest bidder, who perhaps has nothing to do with sport.
At London 2012 we probably had the most discussions around the senior leadership table about ticketing, because it matters. We knew that whatever we did, most people would not get one of those tickets to the greatest show on earth. We had to be absolutely clear and robust in how we structured that ticket offer so that, even if people were unlucky and did not get a ticket, they could at least see exactly what we did at every stage and see that it was transparent, fair and that there was no secondary market.
Baroness Wilcox (Con)
My Lords, this has been a marvellous debate. I have heard so many wonderful, emotional things, and now I have to pull myself down and say, “Actually, fraud is already illegal in this country; we do not need any more law—we have enough of that”. We need what we have heard about today from my noble friends Lord Stoneham and Lord Younger of Leckie. The secondary and primary movers in this area need to improve access, and need to do what we need to do for consumers all the time.
What a consumer needs more than anything, first and foremost, is choice. Secondly, we need access to the choice—where do I get the ticket? Do I get it from a reputable source? Therefore we need a choice, access to it, and information about it, all of which has been described here today. I am talking about facts that we have known about for ever. Trading standards has already spoken; it stands for the same six rules for consumers. We want equity; we want it to be fair; and at the end of all that, we want redress. If it goes wrong—if there is cheating—we need that. If we push this underground by trying to tinker with the legislation we already have, then we will have no way of helping the poorest, the least informed or the most overexcited, who will not get their money back and will not get anything. It is stupid to even consider doing it: this is an emotional appeal. I can imagine that on sports tracks it all sounds wonderful, but if you want to get the job done right, the answer is to do it the other way: get the sports operators and the secondary markets right so that we can read about it and understand what we are doing so that no child turns up with a ticket that is a wrong ticket. We will not do it by trying to reinvent the law. We already have a law of fraud.
Lord Grade of Yarmouth (Con)
My Lords, I declare an interest as an occasional West End producer who tries to flog a few tickets here and there. The secondary market has been with us for many years. I well remember in my youth assisting in a Royal Variety performance and my job was to get the artists lined up on the stage to be greeted by Her Majesty after the performance. I stuck particularly close to the late and rather wonderful Tommy Cooper, who was somewhat uncontrollable; he was told very clearly—as all the artists were—not to speak to Her Majesty until the conversation was opened by her good self. Of course, however, as Her Majesty approached Mr Cooper, he jumped in and said, “Your Majesty, do you like football?”. Her Majesty replied, “Actually, not terribly, Mr Cooper”. He said, “Can I have your Cup Final ticket?”.
Whether this is an early example of the secondary market, I am not sure; but what is clear to me from listening to this debate is that the secondary market is alive and well and needs to be encouraged. The proponents of this amendment are seeking not to attack the secondary market, but to encourage it and legitimise it, and to help the sports bodies and promoters who create the events for which there is demand for tickets to manage them so that there is not £1.5 billion-worth of fraud. This is an attempt to attack tickets that do not exist; it is not an attempt to attack the secondary market. There is clearly a very serious problem here: people are being defrauded; the law is clearly deficient. If the Minister sets the Government’s face against this amendment, it is incumbent on them to acknowledge that there is a problem here and come forward with a solution of their own. This is easily the best solution that I have heard; it has the support of the people who create the events and have the interests of their consumers at heart. I sincerely hope that the Government—if they are unwilling to accept this amendment—will come forward with proposals of their own to deal with the £1.5 billion-worth of fraud that has been going on too long.
Lord Stevenson of Balmacara
My Lords, I echo the words of those noble Lords who have said that this has been a very good debate: it has indeed been good and it is right that it should have been, because it raised difficult issues with which the Government have been grappling. The predominant weight of the arguments that we have heard today—because they were not universally on one side—was for change, so I hope that that will weigh heavily with the Government when they come to consider what they are going to do.
I had a full speech here, full of witty aphorisms and wonderful evidence, but you always find that in debates of this nature, somebody stands up and says, “Do you know, just about everything that could be said about this thing has been said, but not by everybody,” and then they repeat them. I am not going to do that. The issue on which I want to reflect is what on earth the Government are going to do with this. When you have had your case as put in Grand Committee completely destroyed by the forensic words of the noble Lord, Lord Moynihan; when you have had your best arguments bashed to boundary by the noble Baroness, Lady Heyhoe Flint; when you have reduced the noble Lord, Lord Clement-Jones—and it is an astonishing thing—to speak for less than three minutes in a debate; when your former Secretary of State is lining up to give you good advice about how you should deal with this, then you are in a spot of trouble.
You know you are in trouble when you have to rely on people on the other side who are basically scaremongering. I respect the noble Lords who have spoken in support of the Government on this matter, but I think they went way over the top, while we on this side were utter models of restraint. We insisted on only two things: that the equity that should exist for anybody who wishes to buy tickets is not abolishing, changing or adjusting any market; I thought that the noble Lord, Lord Grade, made that point very well, and it was previously made by the noble Lord, Lord Holmes, who picked up the point made by the noble Baroness, Lady Heyhoe Flint. Instead, it is about making those markets that exist work fairly, removing the fraud where it is possible, and making sure that people can see and get access to the events they want. When you have consumers, event organisers, participants and the police—for goodness’ sake—on your side, what on earth are you doing, and who are you listening to when you stand against them?
Baroness Neville-Rolfe
My Lords, many of us love British sport and our creative industries. This love unites most of us in the House and certainly those in the Chamber today. As the noble Lord, Lord Stevenson, said, it has been a very good debate. We have had a star cast, including ladies of sport—the noble Baronesses, Lady Grey-Thompson and Lady Heyhoe Flint—and the noble Lord, Lord Holmes, so we have had real experts.
Noble Lords will know that I take a great deal of personal interest in this issue. In fact, I should almost declare an interest as a mother of three cricketers. I have met the England and Wales Cricket Board, the organisers of Wimbledon and the Rugby Football Union. I have also met Which? and I am aware of the interest of UK Music, which I meet on other things. I have actively engaged with Mike Weatherley MP and his All-Party Parliamentary Group on Ticket Abuse. I have been working with these bodies to try to get to the core of this issue: what we can best do to help and protect the fans? It is the fans who really matter in this equation.
I congratulate the noble Lords, Lord Moynihan and Lord Clement-Jones, and the noble Baroness, Lady Heyhoe Flint, on their extensive work on this issue and the expertise they always bring to our debates. Most fans buy tickets direct from the venue or the organiser, often well in advance of the event. To pick up a point made by the noble Baroness, Lady Heyhoe Flint, debenture holders and sponsors often get ticket allocations well in advance, which is why there are sometimes tickets on sale well ahead of events. A lot can change between a ticket being bought and the event itself—people fall ill or make other plans—and these fans then resell their tickets to other fans. This is the market we are discussing today, for which there has been great support. I agree with the All-Party Parliamentary Group on Ticket Abuse when it says that,
“the existence of a secondary market is justified by the need of consumers to pass on tickets bought for events that they can no longer use”.
Let me be clear: we believe fans should be protected in this market.
If the House will bear with me, I will respond to the debate and will then set out some new plans to take things forward. The noble Lord, Lord Moynihan, talked about fraud. Fraud is a criminal offence under the Fraud Act 2006. It covers activity by all sellers, including consumers and traders. Many of the actions referred to are fraud: selling tickets you do not have and have not purchased is fraud; traders impersonating consumers to sell tickets are committing criminal offences; and, arguably, selling tickets knowingly in contradiction of their terms and conditions without informing the consumer of this may be fraud.
Repeating in the Bill that fraud is a crime would not make it any more illegal. What matters to fans, and many of your Lordships, is enforcement of the law that we have. There is fraud in the ticket market: we do not dispute the numbers quoted from the National Fraud Authority on this. In the specific case of ticket fraud, it reports £1.5 billion of losses. That is not a number to be ignored and we are not going to ignore it. As my noble friend Lord Grade said, there is a serious problem.
The Government have a huge focus on cutting economic crime, and we have created a powerful Economic Crime Command within the National Crime Agency to drive this forward. We have also strengthened the reporting and intelligence arrangements for fraud. ActionFraud is now the single national reporting centre for fraud and financially motivated cybercrime. Since 1 April this year, responsibility for ActionFraud rests with the City of London Police, bringing it closer to the National Fraud Intelligence Bureau. This allows links to be made between disparate crimes that would otherwise not be connected and it has led to a significant increase in the reporting of fraud. The Government are also investing £860 million through the National Cyber Security Programme, which includes work on online fraud.
Lord Deben
Can the Minister help us in this way? She has put forward a number of changes that she intends to make in bilateral discussions and in guidance. Will she agree to take this away and see whether what she has already said can be included in the Bill as statutory requirements? If she were able to do that, I think many of us would be able to support her. The argument has been quite clear that no one is trying to stop the secondary market and no one is trying to do the things that she fears. All we are trying to do is to stand up for the consumer. If she could just give us that, I am sure that we would support her.
Baroness Neville-Rolfe
I thank my noble friend Lord Deben. I think I have made a number of commitments. I have set them out in the legislative framework that exists. I will certainly look at how the points that I have made today are implemented. It would be wrong for me to make a commitment to amend the Bill because I am not sure that amending the Bill is what is needed today. What I think is needed is the way forward that I have described. It has been a good debate. The Government have listened and I ask for the amendment to be withdrawn.
Lord Moynihan
My Lords, one again I thank my noble friend the Minister for the time she has taken on this issue, for the hours of meetings and the consultation she has undergone. I also thank all noble Lords who have spoken in this debate. A number of my noble friends believe there may be existing recourse under, for example, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008, which my noble friend mentioned. No one can genuinely believe that that is a reasonable remedy for a true sports fan who has gone to Gleneagles to see the Ryder Cup and has been sent home disappointed.
That is all ex post. The problem is that something is seriously wrong with what is on the face of the ticket today. Something is seriously wrong with the implementation of the regulations. Something is so wrong that this is a £1.5 billion fraud every year. It is not something that requires minor change or, with the greatest respect to my noble friend the Minister, will be remedied by another round table the month after the general election next year. It will be faced only if the Government recognise their own best practice. I am not standing before the House asking for a whole raft of new legislation. On the contrary, I would argue that we should have less regulation, but the regulation that we should have should be on the face of the Bill and it should work. That is all the amendment seeks.
We are absolutely not against the secondary market. I say to noble Lords who have implied that we are that we firmly believe in the importance of an effective secondary market. We live in an age where the web drives this market and we want to ensure that that secondary market works to the benefit of consumers. The Bill is all about consumers. We believe in choice, access and information but we believe in getting the secondary market right. We believe in ensuring that an individual who buys a ticket on the secondary market has the information on the ticket to ensure that they can enjoy the theatre or go to a sporting event without being party to £1.5 billion a year scam.
Consumers are losing out. It is not just noble friends who have spoken to the amendment who believe in what I am saying. The all-party group believes it and the police believe it. All those who reported to the House after the Olympic Games, having learnt the lessons of the Olympic and Paralympic Games, believe in the effective operation of a secondary market. The reality is that the existing regulations do not work. The noble Lord, Lord Pendry, and I have been working together on this for 20 years. Three sets of legislative proposals have been made and the reality is that the most recent regulations simply do not work. We are very grateful to the Minister for offering another round table and encouragement to the industry. We are grateful to her for the opportunity to sit down and have a review next June. However, to use a sporting metaphor, that kind of offer would be tantamount to kicking the ball into the long grass for another few years.
It is a simple, clear amendment about increasing transparency. It is about improving and reducing regulation and empowering consumers. Given, sadly, that, in response to the noble Lord, Lord Deben, the Minister said that she is not prepared to go away, consider what has been said and come back at Third Reading with an amendment, I have no alternative but to test the will of the House.
“Goods sold under hire-purchase agreements and conditional sales contracts
(1) This section applies to a contract under which a consumer purchases goods from a trader under—
(a) a hire-purchase agreement (as defined in section 7), or(b) a conditional sales contract (as defined in section 5(3)).(2) The trader—
(a) must provide information and adequate explanations to the consumer before a contract is made, which would allow the consumer to compare the total sum that he or she would pay under that contract and a representative retail price for the goods;(b) must not require the consumer to purchase an insurance policy which is sold or brokered by the trader as a condition of entering into a contract.(3) Within 12 months of the passing of this Act, the Secretary of State shall create regulations by statutory instrument—
(a) to specify steps that a trader must take before taking action to enforce rights under a contract or to take possession of the goods; (b) to specify steps that a trader must take before a contract is made to ensure that that contract is affordable and appropriate for the consumer.”
Baroness Hayter of Kentish Town
If we are allowed to have a small word of congratulation, I congratulate the noble Lord, Lord Moynihan.
My Lords, this House, as we know, has had some major achievements in tackling high-cost and exploitative credit. Amendment 14 concerns a new, effectively unregulated and exploitative form of loan that has sprung up on our high streets. Along with other high-cost credit, it is found in low-income and deprived areas. It is known as rent to own. It works by consumers theoretically renting household goods—washing machines, fridges, TVs, beds—but with the rent eventually being used to purchase the product.
However, because it is deemed rent, there are few of the safeguards which would cover, for example, a bank loan, if that had been taken out to buy the same product. So there are no checks on affordability for a product aimed at consumers who are “credit constrained”—those are the words of the person who runs one of these big companies. There are no safeguards against the property being repossessed for missing a payment, because, until the final payment, the product is only rented, not owned. While the consumer is theoretically renting the product, though in their mind they are in the process of buying, a missed payment can lead to repossession.
Some of these stores show little forbearance over a missed payment, despite the fact that the consumer may have already paid well over the true value of the goods by the time they come to miss a payment. Furthermore, the prices charged are pretty exorbitant, far exceeding normal retail prices, even including any interest had a bank loan been used to pay for the item. I found a washing machine priced from £400 to £600, depending on which outlet I went to, but it was £1,560 at one of the rent-to-buy stores—up to four times the price. A table which was £200 at Argos was £468 at BrightHouse, one of the rent-to-buy stores. The APR, which admittedly it prints in some of its brochures, is between 60% and 90%. Adding up all these so-called rents amounts to far more than the list price, plus what interest would be paid if the item was bought with a bank loan.
Furthermore, the companies add in compulsory and expensive insurance, even though the goods still belong to the shop, so probably do not even need insuring. BrightHouse told me that the insurance on a £600 product would be £150 over three years. That is far higher than any of us would be able to get for a normal contents insurance. And the insurance is with its wholly owned, Malta-based insurance company or via its Isle of Man company. To add insult to injury, its marketing uses that favourite trick to tempt the buyer, highlighting the price per week rather than the total cost. So the price of a Samsung gold laptop is splashed as £13 a week, albeit that the full cost is £1,392, which includes 94.7% APR. It is little wonder that more than a quarter return their goods within the first 13 weeks of purchase, by which time they will have paid quite a chunk of money for just three months’ use of the item. In the case I mentioned, £170 would have been paid for something that might retail for only £500.
It is also little wonder that there is money to be made in this way. One of BrightHouse’s companies, Caversham Finance Ltd, made £30 million profit before tax, despite its trading company’s annual report stating:
“2014 was … challenging … with customers under pressure from continued high inflation, low wage growth and … the government’s much heralded changes to the welfare system have increased uncertainty for a significant portion of BrightHouse customers who are completely or partially reliant on benefits”.
We have it even from the companies themselves that they are targeting these products at customers who are completely or partially reliant on benefits. Is anyone surprised that I question the business model of a firm that profits from selling high-end goods at over-the-odds prices with compulsory expensive insurance to some of the most vulnerable in society?
Amendment 14 requires a company to set out the total price of the goods including the cost of the credit agreement. It bans making insurance compulsory and it requires the Government to set out guidelines both on checks on affordability and on possible repossession. This is not an attack on any weekly payment system, which can help those on lower incomes with their household budgeting. However, the business model used by companies like BrightHouse is so stacked against the consumer that it is little short of exploitation. I therefore hope that the Government will accept this measured approach, which does not ban this form of credit; it simply introduces greater transparency along with some safeguards. I beg to move.
Baroness Jolly
My Lords, the Government share the noble Baroness’s concerns about the risk of consumer detriment in the hire-purchase credit market, particularly to the vulnerable consumers that she has described to the House. I wrote to the noble Baroness on this subject recently and want to take this opportunity to underline that this does include rent to own and we are talking about the same issue.
We have stated before in Committee that consumer credit regulation transferred to the Financial Conduct Authority on 1 April this year. The rules for the consumer credit market, put in place by the FCA, were made with the stated aim of: ensuring that firms lend only to borrowers who can afford it; increasing borrowers’ awareness of the costs and risks of borrowing unaffordably; and ensuring that consumers have access to support if they have financial difficulties.
Accordingly, the FCA rules for hire purchase and conditional sale agreements, including rent-to-own agreements, specifically require firms to provide pre-contractual explanations and information to a consumer before a contract is made. These rules are in line with European requirements, including setting out the total amount payable, the cash price of an item and the total cash price if there is more than one.
Firms must also adhere to debt collection rules, including treating customers in default or arrears difficulties with forbearance and due consideration; and assess creditworthiness and affordability, including the potential to impact adversely on the consumer’s financial situation, and the consumer’s ability to make repayments as they fall due. Where firms sell insurance products, they must do so in line with the FCA’s requirements around assessing consumers’ eligibility to claim on a product, and the high-level principle of “treating customers fairly”. Firms must also give a separate price for the insurance product and explain whether it is compulsory.
These rules are in force now, and the FCA can enforce breaches of its rules— there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA keeps all its rules under review and continually considers whether further interventions are needed in the consumer credit market. It will set out further thinking early in the new year.
Regarding the noble Baroness’s specific points about contract enforceability, lenders are already required to serve a statutory notice under the Consumer Credit Act before enforcing the agreement or repossessing goods. Goods cannot be repossessed without a court order if the consumer has paid at least a third of the total amount payable. The FCA also sets out how firms must undertake affordability assessments before entering into an agreement, including taking reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner, without undue difficulties.
To underline that point, the FCA has had full use of these powers since 1 April and can make use its broad enforcement toolkit to punish breaches of its rules. The FCA also has flexible rule-making powers to take further action where it deems it necessary in the protection of consumers. The Government believe that this, alongside the existing protections set out in legislation, provides robust protections for consumers in the conditional sale and hire purchase markets. I therefore ask the noble Baroness to withdraw her amendment.
Lord Harris of Haringey (Lab)
Before the Minister sits down, could she address the point about the requirement to purchase an insurance policy? Is that something specifically not permitted at the moment; or is she saying that that is acceptable policy that the Government are prepared to see happen, on the basis that customers are able to enter into choices knowing their position? At the moment, it is not clear that that rather important clause in the amendment is addressed by the answer that the Minister has given.
Baroness Jolly
My Lords, the information that I have regarding insurance is that the FCA makes clear rules about insurance with these sorts of products. I will write to the noble Lord to clarify the situation on insurance that has to be purchased from the same firm from which customers are taking out hire purchase on a product.
Baroness Hayter of Kentish Town
I thank the Minister for that and indeed for the letter from her colleague the noble Baroness, Lady Neville-Rolfe, on 13 November. This is a little like the last debate. We keep being told that all the regulations are there and that everything is fine but then we hear from Citizens Advice, Debt Line and other organisations that people are getting into trouble with these payments. The figure that was given to me in a meeting this week with BrightHouse that a quarter of the people are actually having to stop payments after 13 weeks suggests that there is something wrong. We are back into, “Don't worry about it: all the rules are there”, but the evidence on the street is that people are taking out these products when they clearly cannot afford them.
I have two other issues. One is insurance. It used to be very common to have to buy travel insurance when you went through a travel agent, but the Financial Services Authority, as it was at the time, stopped that. If the answer to my noble friend Lord Harris’s question is that compulsory insurance purchased through that company so that you cannot shop around is permitted at the moment, we hope that in future the FCA will say that it is not permitted.
I leave the other issue with the Minister because I do not expect a reply at the moment. One of the great advantages of being regulated by the FCA of course will be absolute access to the Financial Ombudsman Service. It would be helpful to know whether that will be made known to all customers of these companies. I hope that the FCA will hear this and we do not continue with the idea that just because something is being regulated there are no problems, because sadly there are. I beg leave to withdraw the amendment.
“Product safety and recall
(1) The General Product Safety Regulations 2005 (SI 2005/1803) are amended as follows.
(2) In regulation 9 (obligations of producers and distributors), after paragraph (3)(d) insert—
“(e) a summary of what the producer or distributor suspects, or has reasonable grounds to suspect, is the number of consumers affected and the type of personal injuries and property damage which the risk associated to the product has caused”.(3) In regulation 32 (reports), after paragraph (5), insert—
“(6) Before completing any report under this regulation, the Secretary of State shall consult the enforcement authorities, such bodies representative of producers and distributors, such bodies representative of consumers and such other persons as he thinks fit.”.
(4) In regulation 33(3) (duty to notify Secretary of State and Commission)—
(a) after “specifying the reason for taking it” insert “, and shall publish such measure, and the reasons for taking it, on his department’s website”,(b) after “of any modification or lifting of such a measure” insert “and shall publish any such modification or lifting immediately on his department’s website”.(5) In regulation 33(5)—
(a) after “the Secretary of State shall immediately” insert “publish such measure or action on his department’s website and”,(b) after “of any modification or withdrawal of any such measure or action” insert “and shall publish any such modification or withdrawal immediately on his department’s website”.(6) In regulation 39 (information)—
(a) in paragraph (1), for “shall in general make available to the public such information as is available to it on the following matters relating to the risks to consumer health and safety posed by a product” substitute “which has received a notification under regulation 9(1) shall immediately publish on its website in respect of the product”,(b) after paragraph (1)(b), insert—“(c) a summary of the number of people reasonably suspected of being affected, and the type of personal injuries and property damage reasonably suspected of being caused, by the risk”,(c) in paragraph (1), for “and the measures taken” substitute “and the measures or action taken, whether on a compulsory or voluntary basis,”.”
Baroness Hayter of Kentish Town
My Lords, this amendment is in my name and that of my noble friend Lord Stevenson. It addresses a serious, indeed often fatal, weakness in consumer protection. When a dangerous fault occurs in an electrical product, there is no adequate mechanism whereby other owners of that same dangerous product are notified of the need to exchange it. The amendment therefore requires manufacturers to inform enforcement authorities about the number of consumers affected and the extent of damage and injury that has been caused. It also requires the Secretary of State to publish information on dangerous products.
It is estimated that approximately 40 to 45 deaths a year are caused by faulty appliances. Although there is a system for recalling dangerous products, it is deeply flawed because of the difficulties of alerting consumers who bought such faulty products and because of unjustifiable delays on the part of some manufacturers in recalling products, even once they know them to be unsafe. Such cases relate to potentially fatal faults arising either from fire, electrocution or carbon monoxide poisoning. Indeed, probably more than 1 million faulty products are still in people’s homes.
The problem is that manufacturers currently have no legal obligation to declare how many such dangerous applications are in circulation. Furthermore, once a manufacture becomes aware of faults, there is no specified timeframe within which they have to act to have others recalled. Some manufacturers have taken years to take action after accidents caused by their appliances. The BIS guidelines are that recall should be expected as soon as the manufacturer becomes aware of the problem, but that is not specific enough. Even more important, perhaps, it is not mandatory. Sadly we see preventable deaths occurring because of failings in the recall system.
I spoke in Committee about the case of Santosh Benjamin-Muthiah, a 36 year-old father of two who was killed in 2010 by a fire caused by a fridge freezer that had been recalled. The manufacturer had been aware of the fault three years earlier but failed to issue a safety notice until 2011—in other words, a year after the death of Santosh Benjamin-Muthiah. By that time, half a million defective fridge-freezers had been sold. Even two years after the recall started, there were probably 100,000 still unidentified in people’s homes.
In another case, Beko was fined £76,600 for failing to inform trading standards of a serious risk posed by some of its cookers. Despite being aware of the fault in 2009, Beko notified trading standards only in 2013. Hotpoint recalled dishwashers with a fire risk a whole year after Which? had raised concerns about them. So there are problems of late starting but, even once something starts, the average success rate for product recalls is only between 10% and 20%.
The current voluntary and slightly haphazard approach is clearly not working. On the one hand, manufacturers fail to recall—due either to cost or to worries about reputational risk, in which case sanctions are inadequate. On the other, despite the producers’ best efforts, current practice is dangerously inadequate, leaving thousands of faulty products in circulation.
In Committee, we asked the Government how many cases of preventable deaths were documented. The Minister responded by letter, saying that she was unable to provide the number of fatal injuries caused by unsafe electrical appliances. However, the DCLG fire statistics do have the data, which show that there were more than 16,000 fires a year caused by faulty products, leading to 15 deaths and nearly 800 injuries. Electrical Safety First’s research into consumer attitudes towards product recalls demonstrated a strong appetite for change. Its report, Consumer Voices on Product Recall, found that a quarter of people thought there was already a central repository of all recall information. So the website called for in our amendment would create what many consumers assume already exists.
Only one-third of consumers always fill in the registration form down at the bottom of the packet when they buy electrical products—we have all seen it there. Six out of 10 say they would be more likely to fill it in if reassured that the information would not be used for commercial gain. Only an independent database, as proposed in our amendment, would deliver this peace of mind. An industry-led list would not encourage people to register, because they would believe that their details would be used for marketing. Of 17 registration forms analysed, only one mentioned safety as a benefit of registration—so it is no wonder people do not think they want to sign up. It is simply not the manufacturers’ priority and it will not become their priority until legislation compels them to take action. Peter Dartford, President of the Chief Fire Officers Association, said:
“The reality is that it is the manufacturers who have created these risks and it is their moral and legal responsibility to ensure these risks are eradicated from homes”.
At the inquest into the death of Mr Benjamin-Muthiah, the coroner called for the creation of a simple, easy to use, government-funded or national website where all faulty products could be registered and accessed by consumers and retailers. He called also for increases in the fines for manufacturers who failed to notify and the creation of a code of practice on product recalls. Our amendment would strengthen consumer protection in line with the views of the coroner, of consumers and of the fire officers, to say nothing of the views of the families of those who have died needlessly. I beg to move.
Lord Harris of Haringey
My Lords, about a year ago, in my capacity as chair of the National Trading Standards Board, I had a meeting with what I think was then called the Electrical Safety Council, now rebranded as Electrical Safety First. We were not discussing this issue but it was raised as one of the concerns that the then Electrical Safety Council had about the way in which the recall system worked.
My noble friend highlighted a number of concerning issues. These include, for example, the length of time that often seems to elapse between manufacturers becoming aware of a product failure or an incident, even one leading to an inquest, before they take action to recall products. Their recall efforts are often minimalist in trying to make sure that the message reaches consumers.
I hope that the Government are not simply going to tell us that self-regulation works best and that the systems in place are adequate. The examples that have been cited and the fact that this remains a continuing concern show clearly that action needs to be taken along the lines of my noble friend’s amendment.
Baroness Neville-Rolfe
My Lords, protecting consumers from serious injury and property damage caused by unsafe appliances is a crucial government responsibility. I can assure your Lordships that the Government are listening carefully to the concerns expressed in this House during the passage of this Bill and are absolutely committed to improving the systems of product recall, as I will explain. I am grateful to the noble Baroness, Lady Hayter, for sharing some recent experiences.
I am grateful for the work done by the noble Lord, Lord Harris, and the trading standards teams across the country which put considerable effort into enforcing an effective product safety regime. In 2012, they inspected more than 100,000 products, which led to more than 2,000 product lines being withdrawn from the market and more than 750 voluntary actions by manufacturers and retailers. There are other withdrawals that good retailers take proactively. Product liability law is an added incentive to action. Most manufacturers and retailers are keen to co-operate with this enforcement effort and there are strong sanctions if they do not. Under product safety law, offenders can rightly face fines of up to £20,000 and 12 months in jail.
However, noble Lords are understandably concerned that we should be rigorous in looking for ways to improve the effectiveness of the recall system, the importance of which I know so well from my retail experience. One important aspect of an effective system is making sure that retailers and manufacturers can contact consumers who have bought an unsafe product. Some good work is already going on across the supply chain to address this issue. It is being led by the Association of Manufacturers of Domestic Appliances and supported by BIS and the Trading Standards Institute on a Register my Appliance portal for consumers, which was launched earlier this month—I hope that noble Lords are all listening because, as a citizen, one should register one’s own appliances. This will make it considerably easier for consumers to register contact details so that they can be traced more easily in the event of a product recall. By encouraging consumers to register their products and to maintain their contact details, it will be much easier to contact relevant consumers in the event of a product recall.
In addition, Electrical Safety First, to which the noble Lord, Lord Harris, referred, is working to explore the options for improving traceability and recall effectiveness, in partnership with government and industry members. While this work should increase the traceability of consumers in the event of a product recall, we also need to consider whether we can improve the effectiveness of the current system for registering and publicising products that are subject to recall. Alerting consumers to the risks posed by faulty products can be difficult, especially where goods have changed hands or contact details have altered. It is important that all those who have a part to play in alerting consumers can access the information they need. That is why we are acting today to address the concerns raised by noble Lords by launching an independent review of the product recall system. The review will consider existing information systems, such as the Trading Standards Institute website for informing consumers about product recalls, and how well these work in practice, as well as looking at the cases and data to which the noble Baroness referred. It will also consider how well the EU’s RAPEX rapid alert system for dangerous consumer products covers UK needs and identify any gaps in the coverage that may need to be addressed. Once we have appointed a suitable chair for this review, we will expect it to report back within 12 months.
That review demonstrates that the Government take very seriously the issues raised by noble Lords during the passage of the Bill. Robust product safety legislation is in place based on an EU-wide regime, and this legislation provides consistency for business and consumers across member states, but we must ensure that the whole system works effectively to minimise harm to consumers. That will require all the different players to work better in partnership across the supply chain.
In the light of our decision to conduct an independent review of product recall, I very much hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Hayter of Kentish Town
I genuinely thank the Minister for using this opportunity to announce that today. I also thank my noble friend Lord Harris of Haringey for his support for that. I welcome the review and I hope that it will consider one of the problems with the European system at the moment. It covers only goods that are sold in more than one EU country, not those sold either only in this country or only in this country and non-EU countries. I note the Register My Appliance initiative, but there is a problem with it which I hope the Government’s review will consider. The industry-led solution led by the AMDEA continues to be an opt-out system—you have to opt out if you do not want your details used for marketing purposes. It will make people reluctant to register if they know that they will get more junk mail or e-mails from product manufacturers.
I am advised by the people at Electricity Safety First that the system as set up will be used for marketing unless you opt out, and we know the difficulty with that. I trust that that can be looked at in the review.
Baroness Neville-Rolfe
My Lords, the noble Baroness makes a good point, and I will certainly take it away and suggest that we add that to the review of product recalls.
Baroness Hayter of Kentish Town
My Lords, that is very good news and I think that it will be welcomed by consumers as well as by me. In the light of our steps forward, I beg leave to withdraw the amendment.
“( ) Digital content as defined under section 2(9) shall carry the same rights as goods under this Act.”
Lord Stevenson of Balmacara
My Lords, Amendment 16 stands in my name and in the name of my noble friend Lady Hayter of Kentish Town. Digital sales are booming and the digital music, video and games market now accounts for 43% of the total UK entertainment sector. Recent research puts the UK as the leading European country for total digital spent per capita. This is indeed the future.
The main focus of Amendment 16 is the question of whether, when digital content is provided in an intangible form and does not meet quality standards, the consumer should, as the Government propose, be restricted simply to a right of repair or replacement. We believe very strongly that, in addition, the consumer should in such cases have both a short-term and a long-term right to reject the digital content. The Government’s argument is that where digital content is downloaded or streamed, it is not provided on a tangible medium and therefore cannot be returned in any meaningful sense. Passing over the obvious metaphysical absurdity of believing that only physical objects can be meaningful, that is inconsistent—not least because consumers will have a short-term and a long-term right to reject the identical digital content if it is bought on a tangible medium, such as a DVD or CD.
As the BIS Select Committee commented when it was reviewing the draft Bill:
“The different remedies available for tangible and intangible digital content in the bill would … embed inconsistency into consumer law. Consumers experience intangible digital content in the same way as tangible digital content, as a good, and therefore would expect to be able to reject it and receive a refund if the statutory rights are not met”.
Well, they can get a refund, but they cannot reject it. It cannot be sensible for the Government to be sanctioning two different regimes for tangible and intangible goods and services, and I very much doubt that the courts will support that.
The department has produced and circulated a useful note on this whole issue, for which I am very grateful. I am also grateful to the Minister, who wrote to me after the debate we had on this issue in Committee. That was also extremely helpful and informative. However, it is a question of consistency and equity not whether we can analyse this or parse it to the last extent. The right thing to do here is to provide the same rights for all faulty purchases, tangible or intangible, while recognising that any short-term or long-term right to reject needs to be matched by a requirement placed on the consumer to delete the content and, if that is impracticable, to desist from use or copying. There are already remedies in law that would match this issue.
The BIS adviser on this issue, Professor Robert Bradgate, who sadly, I recently learnt, died before he could see his recommendations implemented, recognised that problem in his initial report and suggested that it should be tackled by,
“an extension of the definition of goods to apply provisions of the Act both to goods, and to digital products … and to include power in the … legislation for Her Majesty’s Secretary of State to apply the Act by Statutory Instrument to new developments as they arise”.
That remains good advice. I beg to move.
Lord Clement-Jones
My Lords, I am not sure whether the noble Lord, Lord Stevenson, will thank me for making an even shorter speech than I made in the previous debate. I must say that my breath is somewhat taken away by the sweeping nature of the amendment, which tries to sweep all digital content into the clauses on the sale of goods. The software industry may have some difficulty with some areas of Chapter 3 on digital content, but if what the noble Lord wants happened, it would be horrified. The dialogue between the software industry and the Government may not have produced everything that the software industry wants, but it has recognised that digital content is very different. I forewarned the noble Baroness, Lady King, that I would cite her. Like me, she said:
“I will not speak at length on this amendment or the other amendments … but it seems worth reiterating the peculiar nature of digital content”. [Official Report, 20/10/14; col. GC 183.]
Although I do not have the exact reference, I entirely agree with her. The noble Lord, Lord Knight, made similar points about the peculiar nature of digital content. It would be an extremely retrograde step to sweep up the additional content in this. If the noble Lord had come with individual amendments to the clauses to bring digital content in, I might have been more sympathetic, because one then could have seen the exact consequences of the amendments, but the consequences of this amendment could be quite unforeseen and extremely contrary to the interests of the strong and vibrant software industry that we have in this country.
Baroness Neville-Rolfe
My Lords, the Bill brings in clear quality rights for consumers of digital content for the first time. In this digital age, many of us are consumers of digital content on our smartphones, our smart televisions, our computers and, I was hearing this morning, on wearables. The sector is crucial and growing for the UK economy. The Business Population Survey estimated that there were more than 300,000 digital content firms in 2013—e-book publishers, games, software and website developers—with an annual turnover of just over £200 billion. It is vital that we have the right sort of regulation for that important, very innovative sector. That is why we have consulted widely on our approach to digital content.
The digital content chapter provides that when digital content is faulty, the consumer is entitled to a repair or replacement of the digital content. If that cannot be done within a reasonable time, or without significant inconvenience to the consumer, the consumer is entitled to a price reduction, which may mean some money back or, in some cases, 100%. I set out the general picture because we are about to discuss a number of amendments in this area.
This approach takes account of the way that industry works. As my noble friend Lord Clement-Jones, who I am delighted to see here at this debate, said in Grand Committee,
“in practical terms the software industry will always find a workaround or fix to a problem”.—Official Report, 20/10/14; col. GC 211.]
I have been using that quote elsewhere. In other words, when digital content is faulty, the problem is usually remedied quickly through an update.
The proposed amendment would apply to intangible digital content the same rights as apply to goods. So when intangible digital content is faulty, the consumer would also be entitled to a short-term right to reject, a limit to a single repair or replacement, and a final right to reject. Applying the full suite of goods remedies to digital content where it does not form part of goods, as it does in a washing machine, for example, would result in provisions that were not fit for the digital world.
We want provisions that encourage an increase in uptake and allow industry to innovate and flourish. This amendment would be a retrograde step, to the detriment of consumers. As the noble Lord, Lord Knight, who has already been quoted as a real digital expert, reflected in Committee, we must remember that many digital content producers are micro-businesses and start-ups, and we need to maintain an environment in which they can flourish and provide innovative products—while, of course, not letting them off the hook for substandard offerings.
The noble Lord, Lord Stevenson, made a number of good points, but I feel, as does my noble friend Lord Clement-Jones, that the proposals in his amendment could have unforeseen effects. A short-term right to reject intangible digital content and strict limits on the numbers of repairs and replacements would not be practical in the complex world we live in. In the digital environment, a fault in one copy of digital content may be replicated in all copies, or the fault may not be a result of an action by the trader at all. That is why a repair is a more equitable solution in the first instance than a full refund.
There are also issues around the practicality of “returning” intangible digital content. I think the noble Lord, Lord Stevenson, is suggesting that there should be an obligation on the consumer to delete digital content and on the trader to provide a refund. I do not believe it would be equitable or necessary to impose such a burden on consumers, who may not be technically savvy enough to achieve this—or not without assistance from the content supplier. Of course, many forms of digital content are quickly used, so the consumer may already have taken advantage of the digital content as much as they intended—for example, having viewed the film or read some of the e-book—before they reject it. There is a high risk that a short-term right to reject would therefore push manufacturers towards more restrictive data management techniques that would not be in the best interests of the consumer. Or it could cause the industry to be more conservative in its product offerings, reducing our competitiveness. Innovation would be chilled.
Looking to the future, it is also worth considering the moves in Europe towards a digital single market, and remembering that digital content is commonly sold across borders. The short-term right to reject is a domestic law; there is no short-term right to reject in the consumer sales directive from which many of the goods remedies derive. If we went ahead with a short-term right to reject intangible digital content, we could be out of step with Europe, creating problems for our manufacturers who want to sell across borders.
I believe that, although there are attractions in providing a short-term right to reject for digital content where it does not form part of goods, this would tip the balance of the Bill too far the wrong way. Indeed, it would be to the detriment of consumers, who would suffer from, at the very least, restricted product offerings and higher prices. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her full reply. I would like to come back on one or two of the points that she mentioned. I also thank the noble Lord, Lord Clement-Jones, for coming at me with rather less venom than he threatened me with outside the Chamber beforehand, when he implied that I would be mad even to stand up and make my speech. The bark was rather worse than the bite on this occasion, particularly as I have now discovered that, even though he had the correct item in his hand, he misquoted my noble friend Lady King. My noble friend is incredibly adept on the iPad, and was able to summon up the full quote, and of course it was about a different issue. I shall have words with my noble friend Lord Knight later: he gets quoted too often on these issues and, as I have discovered, he is not always sound on some of the points that we want to put through.
Lord Clement-Jones
“( ) For the purposes of subsection (2), a reasonable person shall be taken to be aware that certain types of digital content commonly include minor defects which do not have an adverse effect on functionality.”
Lord Clement-Jones
My Lords, my noble friend was kind enough to quote me in her previous response, so I hope that she will go even further than that and accept an amendment from me. One lives in hope. I am indeed returning to the fray on the subject of software. I hope that when the noble Lord, Lord Stevenson, reads Hansard he will realise how accurate my quote from the noble Baroness, Lady King, was.
Lord Stevenson of Balmacara
I did not say it was inaccurate; I just said that it was not the complete phrase as recorded. The reference that my noble friend showed me was to bug fixes; it was not about the particularity of the need for a separate regime for returning material to digital suppliers because it was defective in some way.
Lord Clement-Jones
Logically, one thing follows another. That is exactly the purpose of this amendment. Indeed, I shall refer again to the speech made by the noble Baroness, Lady King, on 20 October, as recorded at column GC 183 of Hansard. It has been extraordinarily helpful in formulating the terms of this amendment.
Let me explain. Amendment 34, tabled in Grand Committee, sought to amend Clause 34 to include a provision stating that it is common for computer software to include defects due to its dynamic nature and the complex environment in which it operates. In response to that amendment my noble friend Lady Jolly asserted that,
“the Bill is flexible enough to cope with”,
the differences between complex software and simpler forms of digital content such as music. She said that “reasonable consumers” understood that complex content contains bugs, and that,
“freedom from minor defects is an aspect of satisfactory quality only ‘in appropriate cases’”.—Official Report, 20/10/14; col. GC 184.]
The Minister was clear about this in Grand Committee, but, as the Federation Against Copyright Theft has said, it is far from the case that a district court or a county court would be clear about it.
In the debate, the noble Baroness, Lady King of Bow, suggested that,
“it seems reasonable to say that where minor defects in software do not affect the overall functionality of the product, that digital content should not be deemed unsatisfactory”.—[Official Report, 20/10/14; col. GC 183.]
I agree—and the software industry agrees, and very much supports this approach, as it is much more outcome based. We have reformulated the amendment as a result, and it now says that as long as the defect does not affect the main functionality of the digital content, it should not be regarded as rendering it unsatisfactory.
My noble friend Lady Jolly questioned in Grand Committee what the driver for industry would be to improve the software if the legislation stated that some types of software contain bugs and, as such, this would not mean that the digital content was faulty. However, it is in industry’s commercial interest constantly to improve its products. In fact, to the contrary, the clause as formulated might have an adverse effect in encouraging industry not to make changes or improvements to its digital content. The consequences of strict compliance are likely to be increased costs to consumers and slower product evolution, arising from the increased time and resource required for testing. It is preferable for consumers and businesses to require that minor defects or malfunctions that may surface as a product or service is used be fixed as promptly as possible.
Amendments 18 and 19 aim to remove the risk of claims in relation to minor software glitches. Such claims are potentially expensive and time-consuming for software providers to resolve and would not benefit consumers. In Grand Committee, Amendments 37 and 38 sought to amend Clause 36 to clarify that the presence of bugs in complex types of digital content does not mean that the content is not as described. My noble friend Lady Jolly responded by commenting that,
“digital content either meets the description or … not”,
and that the amendments would undermine,
“the requirement that the digital content should be as described”.—[Official Report, 20/10/14; col. GC 186.]
My noble friend provided a simple example of a defect in software where the spellchecker no longer worked yet the software was described as having this function. With all due respect, the spellchecker example is very simplistic. It is a different situation with regard to complex software such as security software, which has to evolve over time and needs to be updated to address the myriad situations to enable the software to continue to interface with other third-party software and platforms, to continue to function or to address new vulnerabilities.
These issues were discussed during the debate in Grand Committee on Amendment 40A, moved by the noble Lord, Lord Haskel. His amendment would have amended Clause 40 to enable suppliers to make modifications to the software if they are of benefit to the consumer, remedy risks or improve functionality, irrespective of whether the modification would mean that the digital content no longer meets that description. I am pleased that the Government have partially relented on that and that, as a result, we now have government Amendment 20 to Clause 40. The supplier can now add functionality but software suppliers will still not be able to remove features. Neither Clause 36 nor Clause 40 takes into consideration that certain features may have to be removed or disabled from security software. Suppliers of security software may have to remove a function as it is in the very interest of a consumer to do so, as the function could be vulnerable to attack and this specific vulnerability could leave the consumer open to a range of threats—from a virus that will steal personal information or credit card details to malware that will infect a user’s machine, rendering it unusable and/or wiping data such as precious family photos.
Functions of security software are not removed without good reason. If suppliers do not remove a function, there are many circumstances where this will be to the detriment of consumers. I hope that my noble friend will recognise the particular circumstances of software and give her approval at least to the tenor of these amendments. I beg to move.
Baroness Jolly
My Lords, I thank my noble friend for setting out his stall, and I will set out mine. The new quality rights that we are introducing for digital content provide that digital content should be of satisfactory quality, fit for any particular purpose and as described. These core rights mirror those already used for goods, building on consumer expectations and familiar concepts for business. The core rights are principles-based and flexible. This is important for goods and especially important for digital content, which is constantly evolving. They are intended to work effectively in a wide range of scenarios, applying to goods ranging from rubber ducks to luxury yachts. Similarly, they are designed to apply to the range of digital content, from music files to complex security software products.
The key to the success of the Bill is to balance solid consumer rights with workable outcomes for business. This will create an environment where consumers are confident about buying more, contributing to more innovative products and driving growth and innovation for industry. The concept of freedom from minor defects comes into Clause 34 as a factor that could be taken into consideration in the assessment of satisfactory quality.
I am grateful to my noble friend Lord Clement-Jones for his consideration of the question of how freedom from minor defects would apply to digital content which is of a type that commonly contains defects. However, noble Lords should note that, crucially, freedom from minor defects is only part of the assessment of satisfactory quality in appropriate cases. We have made it clear in the Explanatory Notes, as I mentioned in Committee, that it is the norm to encounter some bugs in a complex game or piece of software on release, so a reasonable person might not expect that type of digital content to be totally free from minor defects. The Government, and most consumers, understand that these types of products are commonly released with minor bugs, as a result of the development cycle of these products or the complex environment in which they operate. So while a reasonable consumer might expect a music file or an e-book to be free from minor defects or bugs, they would not have the same expectations of a complex computer game or a complex suite of business software.
We have not taken the step of defining what is or is not a minor defect because that will depend on the context. For example, in the goods context, a reasonable consumer may not expect the design on some hand-painted pottery to be completely uniform, but may reasonably expect it to be scratch-free. Similarly, consumers may reasonably expect some defects in goods sold as seconds, but there would come a point where a defect may render the goods unsatisfactory. However, a defect that has an adverse effect on the functionality of digital content should be capable of being taken into account in assessments of quality. Minor defects are defects that are unlikely to affect the functionality of the product but which, depending on the context, may or may not affect assessments of quality. For example, a minor defect in digital content could be something such as a click sound on a music file, or a character who has the wrong colour hair in one level of a computer game. Whether or not this would affect the satisfactory quality of the digital content would depend on the context, which would include factors such as the type of content and whether that type commonly contains defects.
I understand that industry would take some comfort from having the fact that some forms of digital content contain minor defects reflected in the Bill but I believe that this is neither necessary nor desirable for consumers. Moreover, as I have said already, under Clause 34, “freedom from minor defects” is only an aspect of satisfactory quality “in appropriate cases”. The amendment, as drafted, could narrow an understanding of what a reasonable person would expect in other circumstances.
Taking Amendments 18 and 19 together, I recognise that a defect affecting the functionality of digital content is unlikely to be minor. It is quite right that a defect that affects the functionality of the digital content could affect assessments as to fitness for a particular purpose and would match the description. Of course, if the digital content is specifically described as being free of defects then any defects in the digital content would not match the description. However, “fit for a particular purpose”, and “as described” are concepts that go broader than simply the functionality of the digital content. As such, I would be concerned that excluding defects that do not affect functionality from assessments as to whether digital content is fit for a particular purpose or as described would risk creating a lack of clarity for consumers and lowering consumer protection.
It is also worth reflecting briefly on the requirements of a trader should digital content not be of satisfactory quality, fit for a particular purpose or as described. As there is no short-term right to reject intangible digital content, the remedy would be a repair or a replacement. As the industry usually provides fixes to remedy issues in the form of an update where digital content is not of satisfactory quality, the Bill provides a remedy that is proportionate and in line with industry practice.
Lord Clement-Jones
My Lords, I thank my noble friend. She may be quite surprised to hear this, but I thought that was a very useful exposition, and I do not think we are a million miles apart. If she is not careful, she may be quoted for years to come on a Pepper v Hart basis, and there is no finer monument than that for a Minister. I was pleased to hear that. Consideration of Hansard in due course will give quite a lot of assurance to the software industry. I thank my noble friend very much for that statement and beg leave to withdraw the amendment.
Baroness Jolly
“(1A) Subsection (1)(c) does not prevent the trader from improving the features of, or adding new features to, the digital content, as long as—
(a) the digital content continues to match the description of it given by the trader to the consumer, and(b) the digital content continues to conform to the information provided by the trader as mentioned in subsection (3) of section 36, subject to any change to that information that has been agreed in accordance with subsection (4) of that section.”
Baroness Jolly
My Lords, this amendment reflects the dynamic nature of digital content. We all recognise that digital content changes to some extent over time when we receive updates to our software and apps. I listened carefully to the concerns raised in Committee by the noble Lord, Lord Haskel, and my noble friend Lord Clement-Jones that industry viewed Clause 40 as a potential barrier to providing improvements to digital content, and I am grateful for their careful consideration.
Clause 40 provides that following an update to digital content, that digital content must still meet the quality rights: satisfactory quality, fit for a particular purpose and as described. The provision that digital content should match the description was never intended to fix the digital content to a static point in time. That would not be an option that reflected the way updates work. We made it clear in the Explanatory Notes that there was nothing to prevent updates as long as the contract stated that such updates would be supplied. Moreover, the trader has flexibility in how they describe the digital content at the outset. For example, traders can make it clear that improvements are not precluded. However, the consumer should have some protections against digital content changes which remove features that they relied on when they made a decision to buy the digital content.
There is clearly an important balance to be struck here between the ability of the digital content industry to adapt, change and innovate in a fast-paced environment and the rights of consumers to get what they have paid for. This amendment aims to address the concerns raised in debate that the provision on updates as originally drafted could prevent traders improving digital content or offering flexible products. That is not an outcome that would be good for consumers. The amendment clarifies in the Bill that Clause 40 does not prevent traders adding new features or enhancing existing features as long as the original description is still met. I beg to move.
Lord Stevenson of Balmacara
My Lords, I welcome the Minister’s comments. She is right to have responded to the discussions we had in Committee. I am sure my noble friend Lord Sugar will be looking to hire her shortly, given how much she has responded to what he said through his surrogate, my noble friend Lord Haskel.
I shall ask a couple of questions because, although I am not against this, I am reflecting on the earlier discussions in Committee and the letter received on 5 November from the Minister in relation to free digital content. I am intrigued by her remarks, which are, I think, really about a situation where there has been a consideration—I assume money has passed—so we are talking about content that has been supplied because of a contract that has been established between a consumer and a trader. I am grateful to Pauline McBride of Glasgow University, who raised this point with me, and I shall put a couple of questions to the Minister which arise from the correspondence I have been having with her.
At another point in Committee, my noble friend Lord Knight mentioned that customers frequently supply non-monetary consideration for the supply of digital content. Promises and undertakings made by a consumer under a website terms of use are a good example. There is no doubt that clicking on terms of use or some form of conditions, for example, with a well known retailer would be an example of entering into an arrangement with a supplier of digital content, but is it a contract? If it is, clearly one or two of the things that the Minister said are going to be raised. If it is not a contract, because it is not a monetary consideration, then what exactly are we talking about?
The reason for worrying about this is that research suggests that providers of websites through which access is provided to digital content are applying terms and conditions, warranty disclaimers and indemnity provisions which limit the consumer’s rights. Providers may not be able to circumvent the statutory considerations —even limited to those in the Bill, which I object to them being—but consumers will not be able to get full redress if they have self-limited themselves through clicking on to terms of use created by the website which have somehow reduced the quality of the redress they can get from the original provider. I am taking a long time to describe this, but I hope the Minister understands the point I am trying to make. I am worried about consumers who are not paying a monetary consideration but who are engaging in a contractual arrangement with a website being excluded from normal redress provisions on the grounds that there has been no monetary consideration. If the Minister could write to me on that, I would be quite happy. There is also a question about what happens if the contractual obligations being placed are such that they would not be recognised under the Bill.
Baroness Jolly
I am happy to offer a full explanation to the noble Lord by letter, but I understand that the unfair terms provision still applies when there is a contract but no money is involved.
Baroness Jolly
Baroness Jolly
Baroness Jolly
During the debate on digital content that we had in Committee, I noted a number of concerns raised by my noble friend Lord Clement-Jones, who is not in his place, about the complex environment in which digital content works and the difficulty for the industry in ensuring that its digital content will work seamlessly in all possible configurations on a user’s device and will not have any unintended effects elsewhere on the device.
I am grateful to my noble friend for giving such careful consideration to this matter. As I have said before, it is essential that we strike a balance between providing an appropriate and workable set of protections to consumers in this growing area and the need to enable the industry to innovate and respond flexibly to changes in a fast-paced environment. I believe that the remedies provided in the Bill for faulty digital content are proportionate and appropriate. They provide that if digital content is faulty, the consumer will be entitled to a repair, an update or a replacement, or if that is not possible, some or all of their money back.
However, there is one area in the digital content provisions where statutory liability could extend beyond the price paid for the digital content, covering where the digital content damages the consumer’s device or other digital content, and that is in Clause 46. The clause was drafted to reflect negligence principles and to clarify that consumers have a right to compensation, even for free digital content, when it causes damage and the consumer can show that the trader failed to use reasonable care and skill to prevent the damage occurring.
Clause 46 was drafted to reflect negligence principles. It is therefore appropriate that the position on limitations to liability for Clause 46 is different from that for the quality rights provided in the rest of the digital content chapter. The amendment allows traders to exclude or restrict their liability for damage to the consumer’s device or other digital content to the extent that it would be fair under Part 2 of the Bill. This seeks to maintain the approach taken to this clause of reflecting negligence principles and bring it even closer to the current position on limits to liability. The amendment also corrects an error in a cross-reference in Clause 47(2). I do not think it appropriate, however, to extend this amendment to cover the quality rights in the rest of the digital content chapter. Consumers should clearly be entitled to a remedy for faulty digital content, and the remedies provided in this chapter are appropriate. I therefore beg to move Amendment 22.
Lord Stevenson of Balmacara
My Lords, I am becoming a single-trick pony, as I think it is called. I am going to ask again about free content and I hope that the Minister can give me some solace on it. We on this side are still worried about whether free digital content, generically, can be brought within the requirements of providing quality, fitness for purpose and conformity with description. I am still unclear about how this will work in practice because of the problem in consideration. Maybe that will be covered in the letter she has promised to write to me.
I have an additional worry about this, which is that there are often contracts for delivery of services that might fall into the type caught by the amendment and which may be from a manufacturer rather than from a particular provider of software. I do not wish to accuse any particular manufacturer but will take a well known brand which has a connection with fruit. If its terms of use were such that they were going to cause significant detriment to consumers, would it be possible for the Secretary of State, in extreme circumstances, to make an order specifically addressing the terms of use that were generically produced and always clicked into by people without, I suspect, ever being read? I am a little uncertain about how this bites—sorry about the pun—when we are talking about generic material which will probably be running hidden and not even ever recognised by a consumer, and is possibly free or has at least been delivered free of any additional charge, perhaps because it is an update or a fix. Is there something that could be done on this? I quite understand that it might take time to generate a response and I would be happy with a letter.
Baroness Jolly
I, too, am the digital person for the evening, so rather than trying to put something together here at the Dispatch Box, it is probably safer for all of us if I add it to my letter.
Baroness Jolly
“(6) For provision limiting the ability of a trader under a contract within section 46 to exclude or restrict the trader’s liability under that section, see section 62.”
“( ) In every contract to supply a service, traders who are ring-fenced bodies providing financial services as defined under section 142A of the Financial Services and Markets Act 2000 (ring-fenced body) shall be subject to—
(a) a fiduciary duty towards its consumers in the operation of core services to provide these with reasonable care and skill as well as in the management of any individual contract to provide services; and(b) a duty of care towards consumers across the financial services sector.”
Baroness Hayter of Kentish Town
My Lords, I move Amendment 26 on behalf of my noble friend Lord Stevenson of Balmacara and myself. In doing so, I draw very much on my experience on the Financial Services Consumer Panel, but also, I regret to say, on countless examples since, when we have witnessed financial institutions acting in breach of any fiduciary duty towards their customers and in ways that are highly prejudicial to the whole of the UK’s financial stability and reputation. Most recently, as we saw last week, the FCA had to impose £1.1 billion of fines for manipulation of the foreign exchange market. Exactly in whose interests were those banks working? It was not the interests of individual customers nor, indeed, of the totality of customers.
Baroness Drake (Lab)
My Lords, I support Amendment 26. The question of fiduciary duty and the strengthening of the duty of care in the financial services sector is a matter of considerable significance which has attracted much commentary, increasingly so since 2008. Liberalisation was intended to produce efficient markets, but as we discovered, for many parts of the financial services markets it did not. Conduct, culture and conflicts of interest among the providers got in the way. Governments have still to resolve that challenge. The amendment would place in the Bill a requirement that financial services providers would have a fiduciary duty of care in providing services to their consumers, individually and collectively.
There is still ambiguity as to what the law requires from financial services sector providers in terms of their obligations on a duty of care. As my noble friend has said, we continue to see market failure and an increasing need for consumer protection. Parts of the sector are still characterised by systemic conflicts of interest. We see complexities in the design and presentation of products, asymmetries of knowledge and understanding between trader and consumer, and consumer inertia and behavioural bias. All these combine to build inefficiencies into financial services markets that are profitable to the provider but detrimental to the consumer. Regulatory reliance on compliance with rules, rather than placing greater responsibility on the provider very clearly to act in the consumer’s interests, consistently fails to deliver not only for the consumer but for the economy as a whole. UK financial institutions are at risk of becoming unattractive to investors because they are so vulnerable to regulatory fines.
Over the past 10 years or so, there have been 18 separate competition reviews into retail banking and many other investigations into, and thematic reviews of, various parts of the financial sector, but still we are seeing significant inefficiencies in the market and customers being unable to exercise effective control or influence over providers’ behaviour. There have been so many reports on the financial services sector which have identified parts of the market that cannot be expected to self-remedy. We have seen products such as PPI adding 20% to the cost of a loan, sold in vast numbers and to people who could not claim on them. Consumer behaviour and complexity have allowed firms to design products with high profit margins and then sell them aggressively. The regulatory response to protecting consumers against risky products has included mandated disclosure, requiring people to confirm that they had read and understood the terms and conditions. However, in reality, we know most people do not read those terms and conditions; they trust in the good behaviour of the provider selling them the product, but all too often that behaviour is not good.
On terms and conditions, according to the FCA, most people make choices by stripping away information, not adding more detail. This holds true in bank and insurance contracts and the like, many of which are now, to quote Martin Wheatley, “longer than ‘Hamlet’”. But even when information is shortened and prominence given to key facts, many customers still do not absorb or use the information. The recent FCA work on the UK’s cash savings market reveals that some 82% of adults have a savings account but that the large majority pay little or no attention to alternative accounts on offer. These are arguments for why strengthening the fiduciary duty of reasonable care into the financial services sector through this Bill is so compelling.
I was reflecting in preparation for this debate about the failure of regulatory rule compliance to protect the consumer, when into my inbox came the text of the recent speech of John Griffith-Jones, the chair of the FCA, delivered at the Cass Business School, which was trailed with the press headline,
“The FCA’s increase in regulatory rules has failed to prevent misconduct”.
In his speech, he quotes Julie Dickson, previously at the Canadian Office of the Superintendent of Financial Institutions, who said:
“Having lawyers looking at this line or that clause and debating with you about whether something is do-able or not is not the right conversation to have. The right conversation is the principle”.
Mr Griffith-Jones refers to the FCA’s 11 principles, but of the 11,000-plus detailed rules, he asks,
“how many rules do we need as well? … we have made a great many rules already but they don’t seem to prevent further problems arising, and … what starts as an attempt to provide clarity frequently ends up creating complexity”.
He comments on the FCA rulebook, which,
“looks a bit like layers of sedimentary rock, eminently explicable as to how it got there, and extremely hard work to change radically”.
He concludes:
“We regulators have a big job ahead of us, but modest as compared to the changes required of some of the firms we regulate. Their future behaviour will shape the future of regulation, and over time they will get, from Parliament, the regime they merit”.
He is right, of course, but for me the fear is that Governments will take too long to embrace that very simple principle in legislation that the relevant financial service providers should have a fiduciary duty towards their consumers in the operation of core services to provide these with reasonable care and skill as well as in the management of any individual contract to provide services. It is, after all, the providers’ conduct which will determine the integrity and future of the UK’s financial sector.
As my noble friend Lady Hayter has argued, the amendment would extend the Bill’s duty of acting with “reasonable care and skill” to the financial services industry. The first part of the amendment would establish a fiduciary duty that would demand a higher standard of care for direct consumers, and the second part would extend that general duty to all consumers across the sector. The noble Baroness, Lady Neville-Rolfe, replying to the debate on this issue in Committee, said,
“it is not clear to me what imposing the duty of ‘reasonable care and skill’ would add to requiring banks to comply with the ring-fencing and the many other regulatory requirements”,
a comment on which I have reflected. Of course, structural change is very important in contributing to the stability and sustainability of the financial sector, but it will not provide a solution in its own right. It is clear from the pronouncements coming from the FCA that the behavioural and cultural challenge within the sector remains a major issue, requiring innovative ways of understanding the marketplace, influencing its behaviour and strengthening the demand side—the consumer. I doubt whether ring-fencing and current regulatory requirements alone will deliver the conduct change necessary.
In Committee, the noble Baroness, Lady Neville-Rolfe, argued that the FCA’s 11 principles,
“are high-level requirements which already cover the ground set out in the amendment”.—[Official Report, 22/10/14; col. GC 227.]
I refer to the same principles referenced by the Minister in Committee. Principle 2 is:
“A firm must conduct its business with due skill, care and diligence”,
while Principle 6 states:
“A firm must pay due regard to the interests of its customers and treat them fairly”,
and Principle 8 is:
“A firm must manage conflicts of interest fairly”.
These are relatively modest and soft words from a consumer perspective, when one considers the persistent problems and the imbalance in strength between the supply side, the provider, and the demand side, the consumer, which so often typifies this sector. Achieving cultural change and good conduct in parts of the financial sector remains a challenge, as Mr Griffith-Jones himself confirms, and is the key to the long-term sustainability of the UK financial services sector, in the interests not only of the consumer but of the UK economy, of which it is a significant part. There needs to be an extra push to make financial service providers put their customers’ interests first, and this amendment, with the principle that it enshrines, would begin to make a contribution to that push and restoration of the integrity of the financial services market.
Baroness Jolly
My Lords, before I turn to the amendment in detail, I shall take a step back and look at the amendment in the context of Clause 49 and the wider context of financial services regulation in the UK. The purpose of the Bill is to strengthen the rights of consumers, and it is designed to make changes to consumer law of general application and scope. It is not intended as a substitute for sector-specific legislation or the rules that sector-specific regulators may make. Clause 49 helps consumers by requiring, in effect, that every contract between a business and consumer for the supply of services includes an obligation that the business performs a service with “reasonable care and skill”. The clause would therefore apply to the provision of services of all kinds; it would apply to the provision of financial services by all parts of the financial services industry, not just the provision of core services by ring-fenced banks.
As we all know, the financial services industry—not just banks—is already subject to the comprehensive regulatory regime set out in the Financial Services and Markets Act 2000, a great deal of secondary legislation and the massive PRA and FCA rule books. I am sure that no Member of the House will disagree with the proposition that we need a better deal from our banks, whether as individual consumers, small businesses or, for that matter, society as a whole. The question we now have to consider is whether this amendment would help us to get that better deal. The Government do not consider that it would.
Baroness Hayter of Kentish Town
First, I thank my noble friend Lady Drake for her support on this. Actually, she said it all—ignoring fiduciary duty fails the consumer and the economy as a whole
The Minister has asked what difference the amendment would make. Fiduciary duty does not mean just reasonable care and skill. Fiduciary duty means putting your customer first; not allowing your interest to conflict or to override theirs. The fiduciary duty is quite different from reasonable care and skill. The wording is that these bodies should be subject to a fiduciary duty which they then must provide with reasonable care and skill, but the fiduciary duty is greater than reasonable care and skill. It is about avoiding conflict of interest and about making sure that the decisions you take are in the customer’s interest—albeit the decisions should also be taken with reasonable care and skill.
If I am looking after £1 million of someone’s money, I must put their interest in that money first; and the way I then invest it must be done with reasonable care and skill. That is the extra ingredient that we are seeking to add. Clause 49 by itself—good though it is to include “reasonable care and skill” as it covers financial services—does not include this wider avoidance of conflict of interest, by putting the consumer’s interest first.
No, this will not help get redress. That is not what we are interested in. We want to prevent these things happening. Yes, compensation was paid for PPI—mostly out of the banks’ profits. But that should never have had to be paid—we do not want these things going wrong in the first place. As my noble friend said, rules are not enough; it is a culture change that we need.
We need it written in a Bill that when you are looking after someone else’s money you have a fiduciary duty towards them. There must be some lawyers in the Chamber tonight. They understand fiduciary duty, but it seems that banks do not. As for the other problem and the question of what difference it will make, we do not just want compensation for consumers. Frankly, I want a few hangings. None of the people who mis-sold PPI is in prison. I do not think that any of those people on whom £1.1 billion in fines have just been imposed will be prosecuted. We need this in a piece of legislation, so that if people break it, they can answer for it.
I therefore hope that, even if I do not push this to a vote tonight, the Government understand that we do not simply want reasonable care and skill. Where people’s life savings—their pensions—are in the hands of someone else, whom they cannot check on because they cannot look at their day-to-day decisions, that person must at every moment put the consumer’s interest first. That was what this amendment was trying to do.
I hope that, even though I will now ask to withdraw this amendment, the Government will look at something that is still going wrong, and will not simply say, “The rules are there and are sufficient”, because clearly they are not. For the moment, I beg leave to withdraw this amendment.
“(1A) Where the quality of the service can be reasonably considered to lead to a risk to the personal safety of the consumer, the consumer has a right to refuse a repeat performance, and exercise their right to a price reduction under section 56.
(1B) Any action taken under subsection (1A) will not prevent the consumer from seeking other remedies or further compensation for the consequences of this installation.”
Baroness Hayter of Kentish Town
My Lords, this is a different sort of amendment, which stands in the names of my noble friend Lord Stevenson and myself, and which seeks to protect the consumer who has had something done in their house and a faulty installation has occurred—not simply a faulty installation such as a table being put in the wrong way round, but where there is a risk to the person concerned. Instead of having to have the installers back in to try to put right whatever they have done wrong, it would give the person concerned the right to move to a refund without having to accept a repair first.
The rest of the Bill is very good where it says that there should be only one repair, and that, if that does not work, you can get the money back. However, there are circumstances in which we think they should not have to have a repair done first; they are in their own home and something has happened which makes them feel at risk. Examples of this sort of thing are where a trader has tried to install a dishwasher but floods the whole kitchen, a bathroom floods the kitchen below—which I have seen happen quite recently—or an electrician is sent to install a new shower, and manages to wire the shower to the electric light bulb rather than to the mains. Again, sadly, that is not just a figment of my imagination. A gas engineer may make a complete mess of putting in a new boiler and cause a gas leak, leaving the consumer thinking, “I don’t want these people back in my house—they don’t know what they’re doing. I want them out before they do any more damage, and I want my money back so that I can get someone in who’s a little more trustworthy”. However, as the Bill stands at the moment, the trader may say, “No; I’ve got the right to come in and sort it out before I give you any money back”.
Our amendment would provide clarity for both parties in those circumstances, allowing customers to say: “I no longer trust you because I feel at risk—I want my money back”. I know from Committee that the Government have some sympathy with our point and with our concerns about this, but they argued that in such cases—which I think the Minister understood—the consumer retains the option to seek damages in court. However, that is not what the Bill should require. Taking a trader to court is very difficult for a consumer; they have to instigate legal action, which itself is complicated, expensive and uncertain. More than that, it takes a long time, and if you want a hot shower the next day you probably do not want to wait until your case comes to court before you can get someone in to put the hot water in the right place.
A survey undertaken by Which? showed that nearly half of consumers thought that you should not have to give the trader the chance to fix the problem in those circumstances. We know that the aim of the Bill is to provide clarity on consumer rights, both to the trader and to the consumer, so surely any of these sorts of disputes should be kept out of court and dealt with in this way. If a kitchen fitter says, “I don’t need to give you a refund now; I have the right to come back and repair this”, we do not want that conversation to end with, “I’ll see you in court”. We want the Bill to make it clear that the consumer can get a refund at that stage.
I hope that the Bill will mostly avoid taking the legal route, but it is a shame that it seems the Government felt that that would have to happen in these circumstances. We therefore hope that the Government, having thought about this amendment again, and given that it is only about residential premises, will support it. I beg to move.
Baroness Oppenheim-Barnes (Con)
My Lords, the noble Baroness missed one sort of case. The plumbers, electricians or whoever they are make a charge for coming in the first place, and when they get there, say, “This will need a part that we’ve got to order”. You have already paid for the visit, they demand the money for the parts before they go any further, and they sometimes never turn up again. The noble Baroness can add that to the list.
Baroness Jolly
My Lords, this Bill sets out for the first time in statute what remedies consumers are entitled to request and traders must offer if traders provide a substandard service. That is a real increase in consumer protection. Consumers of services, from hairdressing to plastering, will have access to statutory remedies if those services do not meet the consumers’ statutory rights. I am very proud of this part of the Bill and believe it will lead to real improvements for consumers on the ground.
To help consumers use these new remedies, we have set out clearly in the Bill how they will work in practice. This will also be set out in guidance, which will be available for traders and consumers well in advance of the Bill coming into force. To give an example, if a service is not provided with “reasonable care and skill”, the consumer can ask the trader to re-perform the service so that it does meet that standard. In practice, it may not be possible to re-perform a service, or the trader may cause significant inconvenience for the consumer in doing so. In those cases, the consumer can ask for a price reduction. If the consumer has already paid more than the reduced price, the difference must then be given to the consumer within 14 days. That is a practical process designed to work for both consumers and traders. We have discussed this extensively with stakeholders and businesses overwhelmingly support this way forward.
Importantly, these new statutory provisions are in addition to, not a replacement for, common-law remedies that consumers can currently pursue. We are not taking away a consumer’s current access to redress through the court system. Quite the opposite: we make clear in Clause 54 that these remedies are still available. Clause 54(7) is a non-exhaustive list of those remedies. Guidance on the Bill will also explain that these remedies are still available. Moreover, we are not restricting consumers and traders to the remedies in this Bill. The consumer has a right to ask for what is in these provisions. However, if the consumer so chooses, they can negotiate a different remedy with the trader. For example, they could negotiate to reduce the price of a service without exercising their right to a re-performance. There is support available to enable consumers to do this, notably through the Citizens Advice service. The service provides advice over the telephone, face to face and online, including practical tools such as template letters.
Baroness Oppenheim-Barnes
That is not what I said. I said that they charge to come in the first place—not to carry out the work but just to come and see what has to be done. They charge for that and then they say, “It needs an expensive part, so I can’t do anything for what you’ve already paid me in coming here”. They then come back, possibly months later, with a very expensive part.
Baroness Jolly
I thank my noble friend for that explanation but I think that I will have to drop her a note to clarify that situation. I ask the noble Baroness, Lady Hayter, to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, the Minister said that not all traders are rogues. She obviously meets a different lot from those whom the noble Baroness, Lady Oppenheim-Barnes, comes across. The noble Baroness knows very well that some of them are rogues.
Baroness Hayter of Kentish Town
Some of them are. However, the Bill throughout is very much about the ones who are not good. If all traders were good, we could throw the Bill away. Frankly, we do not need it for John Lewis. It does not need this Bill in order to be good to us. The Bill is about bringing everyone up to the standards that we expect from all traders. It is fine to say that a good trader will come back. If it is a good trader, the customer will trust it and have it back. That is fine. However, what we are after here are the cases where there is something dangerous in the house or where the householder feels at risk from the trader being back.
If I understood the Minister properly, she said that customers have some choices. They can phone Citizens Advice, which of course will give them only advice—it cannot negotiate—or it will give them a template for a letter, which in the circumstances I do not think would be a lot of help. Alternatively, they can go to a website, although I think that a lot of consumers would not find that very helpful at that moment either.
In fact, the Minister has said the same as I have said: the only route you can take is to seek damages in court, which is what our amendment was trying to avoid. We were trying to say that where someone has been in your house and they have done something so badly that you feel at risk, you should be able to get your money back without that person coming back into your house. Clearly, that is where we and the Government have a different view. In those circumstances, I think that we leave consumers as vulnerable as they are now. They are in no worse a position but, at the same time, their position is no better. That is regrettable but it is clearly the decision that the Government have taken. I beg leave to withdraw the amendment.
Baroness Oppenheim-Barnes
“Display of point of sale information about rights
(1) Suppliers of goods and services to which this Part applies shall be required to display at the point of sale essential information in plain and intelligible language and in a reasonable format which explains to customers the relevant rights and responsibilities of consumers under this Part.
(2) This information shall be proportionate to the transaction.
(3) The detail shall be developed by the British Standards Institution.”
Baroness Oppenheim-Barnes
My Lords, Amendment 28 concerns point of sale information. I do not want to bore noble Lords who have heard me say this on many occasions during the passage of the Bill but I consider this to be crucial. At the beginning of the Committee stage in the other place, four special witnesses were called from all the major consumer organisations. They pointed out that 75% of all consumers, before making a purchase, still do not have any idea of their rights or what course they can follow in order to bring a case to court if necessary.
When I think of all the pieces of consumer legislation I have been involved in over the years since 1970 they are as good as nothing. None of them is any good. They are hopeless when only 15% of consumers might benefit from them. This is a marvellous Bill. The Government have been very generous with time and facilities in all the proceedings that have taken place, particularly in the other place where experts were invited and all sorts of pre-legislative scrutiny took place. Nothing was spared. It would be a tragedy if this Bill, which is costly for the Government and costly indeed for a great many people, should prove to be worthless.
We still have a situation where such a large proportion —75%—of consumers still do not know their rights. That is why I consider this amendment to be so important. It states:
“Suppliers of goods and services to which this Part applies shall be required to display at the point of sale essential information in plain and intelligible language and in a reasonable format which explains to customers the relevant rights and responsibilities of consumers under this Part … This information shall be proportionate to the transaction … The detail shall be developed by the British Standards Institution”.
I think it is a pretty good amendment and covers everything. I was preparing a much longer speech. However, I discovered only a couple of days ago that there is legislation already passed in the relevant EU directive that was laid before this House on 13 June this year. I point out to my noble friend the Minister that this was four days before she came into her department so she may not have noticed it. However, all the subsequent items under the directive on consumer rights have come in following her going to her present department. They are now part of the directive and part of what we have agreed under the directive on consumer rights. This is the Consumer Rights Bill. You will hear me saying this possibly more often. It seems not unreasonable. I might say that other countries which are also party to this directive have already introduced legislation of this nature.
What the directive says is actually very short. In Chapter II, which I note we have accepted, core information is to be provided by traders prior to the conclusion of consumer contracts which are not distant from the premises. It is a bit of a funny way of putting it but it means at the premises. Member states may add on further information requirements in their national law. But we do not have it in our national law. We have it only in an EU directive.
When the directive was accepted by the right honourable Dr Vince Cable in the other place it was highly recommended and he said what a good thing it was. I am paraphrasing at the moment. It seems to me not unreasonable to want to see it in legislation in this House. This is the Consumer Rights Bill. This is the directive on consumer rights. The argument is very simple. BIS adds one thing. It also says the information should be given on paper unless you agree to set it out in regulations; by email, for example, if that is what is required. I rest my case. I beg to move.
Viscount Younger of Leckie
My Lords, I rise to speak to Amendment 28 and I emerge once again from my long and deep perusal of Hansard, having not been present in Committee. I want to focus on the important matter that has been raised by my noble friend Lady Oppenheim-Barnes on the question of displaying rights at the point of sale.
I have read the amendment carefully, but I want to focus initially on a couple of issues. The amendment states:
“Suppliers of goods and services to which this Part applies shall be required to display at the point of sale essential information in plain and intelligible language and in a reasonable format which explains to customers the relevant rights and responsibilities of consumers under this Part”.
How does one define “essential information”? I note proposed new subsection (3), which states:
“The detail shall be developed by the British Standards Institution”,
but I would like to point out that in proposed new subsection (2), which states that the,
“information shall be proportionate to the transaction”,
two issues arise. I would argue that it is very broad and not clear enough, as with proposed new subsection (1), to be on the face of the Bill. When one is talking about being “proportionate to the transaction”, one has to bear in mind that sales take the form of so many different types of products. There could be a very high volume of low-priced products, so there would be an immediate issue of how to tackle it.
I digress slightly and want to go back to the Committee stage, as I took a keen interest in the speech given by the noble Baroness, Lady Hayter. I am interested and glad to see that she has stepped back from promoting the idea of consumers’ statutory rights being read to them, or given to them at the point of sale. Perish the thought that this might happen and that on a busy Saturday long queues form at petrol stations while cashiers struggle to meet legal requirements in reading customer rights when selling non-petrol or non-food goods. I am sure that the noble Baroness did not necessarily think about that aspect, and she may well have thought at that stage that such information could be placed on a receipt. Then there was the matter of gaining consistency in this aspect of the law in tandem with effecting adequate training for cashiers and sales staff. I feel that, inadvertently, we may have prevented a gain in incidents on the shop floor as a result of consumers becoming somewhat impatient while waiting to be served.
The important point was made in Committee that communicating consumer rights is relevant for each product sold and could be open to confusion when a trader’s policies and terms exceed the statutory rights. There is a danger that reading out rights might act as a negative or chilling factor by implying, perhaps tenuously, that the product might just be defective.
I wanted to put this amendment in context because I am pleased at least that my noble friend Lady Oppenheim-Barnes has reduced that position in her amendment so that information on consumer rights should be displayed but only at the point of sale. However, as she might expect, I am not in favour of this being set in law either. I believe that it is proportionate to set firm guidelines, which came out of the implementation group, and to go for a voluntary approach.
I believe that this particular departure will undertake a number of key points. First, it will lead to a behavioural change for businesses to display information on the rights of consumers. Secondly, it will be pour encourager les autres; in other words, other businesses will do the same. Thirdly, consumers will become more attuned and astute, so that where businesses are not voluntarily displaying high-level information on their rights, they will be pulled up. There is a caveat that after a while consumers will tire of seeing the same old notices being displayed and looking even more tired than themselves.
For all those reasons, I do not agree with the idea that this amendment should be set in law, so it should not go forward.
Baroness Hayter of Kentish Town
If I have understood the noble Baroness, Lady Oppenheim-Barnes, correctly, it was probably the noble Viscount who, on 13 June, signed into law those rights. I congratulate him on that and on writing into law that all these rights should be made available. That is very welcome and I thank him on behalf of consumers that he does want them in law, although, at the moment, I think he is saying that he does not. Anyway, we congratulate him on what he did on 13 June.
The noble Baroness, Lady Oppenheim-Barnes, is absolutely right that this amendment is crucial to whether the Bill will work. It will not work if consumers do not know their rights. The little placard that is often next to the till which says, “This does not affect your statutory rights” is completely meaningless. We know from work by BIS that two-thirds of consumers do not know that if a major appliance breaks down 18 months after purchase they still have a right to have it repaired or replaced, even though they did not purchase an extended warranty. So we know that people do not know their existing rights.
The difference is that we agree with Citizens Advice that these rights can be set out briefly and simply. You do not even need to say, “Under the Consumer Rights Act”, although it is very nice to give credit to those who put it through. You can simply say, “You have 30 days to return this item if it is faulty”. That does not seem very difficult. I think people can understand it. I think it is all right if it is on the bottom of their till receipt rather than by the side of it. These things can be done quite easily.
There is a political difference here; it is a difference within the implementation group. The consumer groups want this information clearly written and available so that consumers keep on seeing it. Businesses do not want it. The Government are saying, “Let’s listen to business. They don’t want to do it”. I think if we listen to consumers, they would want to do it. The ongoing champion of consumers is right. Let us get this in the Bill and let consumers know what their rights are.
Baroness Oppenheim-Barnes
I thank my noble friend for his intervention. I knew that he laid those regulations under the EU directive in your Lordships’ House, so I hoped that he might be here and I am delighted that he is. My noble friends and the noble Lords opposite will realise that this is a great disappointment to me. I can see that the Government are not of the same mind. The objections which have been put forward are a bit punitive to what is a very simple—
Lord Taylor of Holbeach (Con)
I am sorry to interrupt my noble friend, but the Minister has not replied to her amendment at this stage. I have a feeling that she would like to hear from the Minister before she replies to her.
Baroness Neville-Rolfe
I am grateful to the noble Baroness, Lady Oppenheim-Barnes, for her contribution today and in Grand Committee. I value her long experience and expertise on the subject of consumer rights, including from her time as Minister for Consumer Affairs—I asked at the department and gathered that she was a real livewire—not forgetting her experience at the National Consumer Council and elsewhere.
I am glad that she feels that the Bill process has been good, with pre-legislative scrutiny and stakeholder involvement. I think that is an interesting general lesson to learn. I agree that consumers and businesses should be educated about their rights and responsibilities effectively. We have made this point many times during discussions. I share the noble Viscount’s concerns about the amendment, because it is very wide ranging.
It also goes wider than the Bill. Consumers and traders need to know about the rights and responsibilities under other consumer legislation, too, such as the consumer rights directive. I can confirm that the regulations came into force in June this year. I thank my noble friend Lord Younger and his role in that process.
I agree with my noble friend that this is a very important area. We will not realise the benefits of the Bill unless the new rights are well understood and used. As part of our work preparing for implementation of the Bill, we have worked closely with business groups, consumer groups and enforcers to develop a high-level plain English summary of consumer rights because information is critical. That summary is being prepared to cover the various circumstances that arise from this legislation. It allows traders the flexibility to display the information in the most appropriate way for their business.
I do not believe that the mandatory approach suggested by this amendment is the most effective way of ensuring consumers are informed of their rights. There is a real risk that overloading a consumer with information at the point of sale would lead to them ignoring that information. Surely that defeats the object of simplicity and clarity. For many things—for example, newspapers or bags of apples—what the voluntary approach allows is common sense. There is also a risk of confusing consumers where retailers’ own policies are more generous than consumers’ statutory rights. A major retailer told us that it already offers terms more generous than the statutory requirements. It has built its brand on that and thinks that displaying information on core consumers’ statutory rights would undermine its message that a customer who was dissatisfied for any reason could bring the product back even if it was not defective.
We are therefore already developing wording that works. We have wording that can be adapted to various circumstances whether you are selling goods in a shop or online. We have business groups committed to promoting this with their members. We have consumer groups that are also committed to promoting this. I do not think that this amendment is the right way forward. Instead, a flexible, voluntary approach will work. Business groups support the voluntary approach, including the British Retail Consortium, the Federation of Small Businesses and the British Chambers of Commerce, all of which are critical to information provision to the many businesses involved and to good customer service and good consumer care. I believe in a simple, clear framework of law. That is important to good traders as well as to rogue traders, to pick up a point made earlier.
The information provision is being done as part of the work of the implementation group, which also involves Which?, enforcers, Citizens Advice and others. I agreed in Committee that other relevant consumer rights, such as that in the consumer rights directive, should be part of the information dissemination process. I do not think that this is the right way forward. I have had useful discussions with my noble friend Lady Oppenheim-Barnes and I ask her to withdraw the amendment.
Baroness Oppenheim-Barnes
I am grateful to my noble friend for going into so much detail and care. I will not say that “live wire” is the best description I would want to be remembered for. I think that the noble Baroness, Lady Hayter, has had some better ones than that in the past. However, I am nevertheless grateful that attention has now been drawn. I still think that it is very strange that your Lordships’ House has committed to a directive that other countries have now translated into their own legislation and which for some reason is still not right.
I take the point entirely that my noble friend made about well known and well loved. I cannot imagine Heinz tomato soup ever needing any recommendations, let alone anything else. Branston Pickle comes to mind. I am not sure if they are allowed to say that any more.
This remains an important issue. It is very important that we get a format which is reasonable, which is not going to form petrol queues and which is easily understood. I hope that the Minister will find the right words and put it into law. I beg leave to withdraw my amendment.
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