Baroness Liddell of Coatdyke
Main Page: Baroness Liddell of Coatdyke (Labour - Life peer)Energy Bill
Baroness Liddell of Coatdyke Excerpts
Baroness Liddell of Coatdyke
My Lords, I will be brief. I welcome the proposed new clause. Unfortunately, I did not have the opportunity to attend the briefing yesterday evening but wish to make a couple of points. I have had a lifetime’s involvement in fuel poverty, having come from an area where the fuel poor are always with us. Sometimes one of the key things you need when dealing with fuel poverty is not fancy targets or models but a soupçon of common sense. This is one of the areas that troubles me about the Green Deal. If you are expecting the fuel poor to front-end facilitations to their house, for example, they are not going to be able to do it because they cannot afford to do so. It is great having a wonderful model that says, “If you up-front the amendments to your accommodation, you will benefit in the longer-term”. However, if you cannot afford to turn your heating on, you are hardly going to be able to afford cavity wall insulation.
I make a plea for some basic common sense when dealing with this matter. I heard the praise of the noble Lord, Lord Jenkin, for the fact that the amendment repeatedly says:
“The Secretary of State must”.
Frankly, the Secretary of State needs some enforcement powers to encourage the industry to get involved actively in the campaign to move people out of fuel poverty, unless he is going to go down to B&Q and get a hammer, nails and some insulating material. We need to have enforcement. With this Bill, as always, a lot of the detail will be in secondary legislation. Until we see the nuts and bolts of the secondary legislation, we will not see whether my common-sense points will be met. I welcome the proposed new clause and will read the secondary legislation with interest when it comes along. However, I repeat that common sense matters even more than targets in relation to this. I urge officials to bear that common sense in mind when they craft the secondary legislation.
Lord O'Neill of Clackmannan
I am very happy to follow my noble friend. The fight against fuel poverty in the past 10 to 15 years has been bedevilled by loose definitions and arbitrary targets. The amendment goes some way to mitigate concerns that have arisen about that. It sticks in my craw to say this but the Government must be praised for obtaining support for the measure from Derek Licorice, the chair of the Fuel Poverty Advisory Group, and Jenny Saunders of the NEA. The fact that people are giving understandably cautious support, but none the less a blessing, for the measure is an indication that Ministers have sought to build bridges on this issue. Known targets and definitions have been taken away and a rather more complex Hills approach has been adopted. That approach has its drawbacks but does take account of the complexity of the situation. Therefore, it is desirable to move forward not using the bludgeon of statutory change but rather a regulatory approach, as that will enable subsequent Ministers of whatever political complexion to adjust and calibrate the policies.
It is also fair to say that for us in Opposition to try putting forward amendments at this stage would be somewhat premature—although, from what one can gather of the parliamentary timetable ahead of us, we will have time, probably over the Recess, to look at some of these issues. Obviously, the statutory instrument and regulatory approach will be the subject of consultation and discussion. One would hope that that need not take an unduly long period. None the less, it will give us some opportunity to look at the fine print of this.
Some of us would be happier about this if we were to see the colour of the Government’s money, or indeed money at all from the Government. Their approach to fuel poverty has been to withdraw state funding from this and make it a tax on the consumer rather than on the country as a whole. That is a flawed policy. It would not be difficult for the Green Deal to become more successful than it is at present, but if it does not become substantially better we will have to look again at the Government providing funds for some of the major programmes that will be required to address areas of fuel poverty. We are not talking about individual households but street after street after street. If approached on that basis, we could deal with an awful lot of the most deep-seated areas which Hills recognises are the core of the problem.
As I said, I do not wish to be grudging in my support for this approach. There will obviously be difficulties and flaws but this is not the time to identify them. The opportunity for that will come on Report and beyond, when we have had time to digest some of the indigestible graphs to which the noble Lord, Lord Jenkin, referred. If we can do that, we can perhaps make something of this. At the end of the day, somebody has to pay for it. At the moment, that will fall in the main on the shoulders of the consumer of gas and electricity. That is not a satisfactory approach to social injustice on this scale. Even with the Hills modification, the scale is intolerable for a society such as ours to leave to some kind of slipshod market mechanism, the like of which we have seen in the Green Deal. The Green Deal might work. It is the only show in town but it will have to start working very quickly or some of us will not be confident that the great ideas and reasoned approach in this White Paper, these documents and expressed in this amendment will be enough, without proper financial support, to tackle the major social problem we have here.
Lord Whitty
My Lords, Amendment 51ZA is a probing amendment, although it is one that the Government could give some commitments to taking forward, if not precisely in this form.
The Government are rightly giving Ofgem the power, in cases of breach of licence condition, to require licence holders—that is, supply companies—to pay compensation to the consumers who have suffered detriment, as well as raising a fine. I am not entirely clear whether that power also covers Ofgem requiring compensation for straightforward breach of general consumer law, rather than strict breach of licence, but it would make sense if it did.
The level of consumer complaints in the energy sector is one of the highest—in some years, the highest—of all sectors in our economy. The level of complaints dealt with by the consumer organisations, the ombudsman and, on occasion, by the courts, as well as by Ofgem, remains high despite significant improvements made or claimed by the supply companies.
It is clear that the complaints systems of several of the large energy companies are not really up to scratch. The ombudsman and Ofgem remark on this from time to time. Tens of thousands of consumers suffer from the effects of mis-selling, misleading information and misleading advice on choice of tariff and other conditions relating to tariffs; for example, on the cost determination. If you switch tariff, you have to pay a significant cost but that is rarely conveyed to you up front in an understandable form when you sign up for the tariff. It is a significant inhibition to many consumers switching and therefore to there being a proper consumer-led market in this sector.
One of the other areas of complaint is contested bills, particularly the estimated bills. As we were saying the other day, these are by definition wrong but are often insisted upon by the companies. On many occasions, eventually a settlement is reached, but it is on an individual basis. It may involve an ombudsman case but it reflects the general approach of the company to its consumers. In the impact assessment of the Bill, the provisions to improve Ofgem’s powers in this area are not given an accurate assessment. However, it is implied that the effect will be positive, and certainly I think that it will be. However, the size of detriment in the energy sector is potentially very large, and the inhibition on taking individual cases is also substantial. You have to go through a complaints process, and if you are not satisfied, you have to go to the ombudsman, take a case to court or get help from the various consumer and interest group organisations. That ends up costing a lot of time and often a lot of money, with not necessarily a coherent outcome to each case.
This situation is not confined to energy but, because of the high level of problems within energy, there are general aspects of provider behaviour from which a large number of consumers suffer. It is difficult to prove on an individual basis, but it is important that we recognise that there ought to be better systems for getting redress for consumers. By and large, consumer law in this country does not include collective provision, unlike in the United States, where there are significant class action provisions. Successive Governments have gone part of the way down the road towards greater collective provision, recognising that, for example, the PPI scandal in financial services would have been much better dealt with had there been a collective redress system rather than often quite aggressive complaints-handling companies taking up cases of varying degrees of authenticity, which led to differential outcomes case by case.
That was recognised by BIS in some of the discussion that surrounded the presentation of the draft consumer rights Bill that is now under pre-legislative scrutiny in another place. You have to get quite a long way into the Bill before you find it, but it is a significant breakthrough. It comes in paragraph 7 of Schedule 14 to the Bill and is the beginning of a provision for general collective redress in this area. It is on an opt-in basis, which is still somewhat narrower than the provision in the Financial Services and Markets Act of the previous Government, which unfortunately had to be dropped in its original form. It had a whole section on collective redress in the financial sector, which could have been taken out and generalised into other sectors and was particularly apposite for areas such as energy, where there is a regulator, regulated provisions and licence conditions, as well as general consumer law.
I attempted to get that written into the Enterprise and Regulatory Reform Bill, given that parliamentary counsel had already cleared it two years earlier. I have not bothered to provide the three pages for this Bill, because it covers esoteric matters relating to energy. I have set myself the slightly less ambitious target of requiring the Secretary of State to come forward 12 months after the Act is passed with some provision for collective redress in this area. I am encouraged by the fact that the Government have provided for at least one form of collective redress through the consumer rights Bill. Therefore, I hope that in 12 months’ time, the attitude of the House of Commons to that Bill and the Government’s reflection on it will give some guidance on how to do this with energy.
Therefore, it is an open-ended requirement on the Secretary of State in terms of the precise provisions. However, it is a signal that in this area of quite substantial consumer detriment and very substantial consumer distrust of the whole system we take this opportunity to make it clear that the Secretary of State must, at some future date, provide a means of collective redress within this sector.
There is a second amendment in this group to which I should refer. Amendment 51ZE seeks to delete the limit of the redress to detriment that occurred more than five years ago. The reality is that some of the mis-selling in energy, just like some of the mis-selling in the financial sector, started a long time ago, and the decision to apply a five-year limit is completely arbitrary. Indeed, that does not apply in the financial services sector. If a practice started seven years ago and was still happening within the last five years, there is no reason why the earlier detriment should not be taken into account. I am being quite modest in suggesting a 15-year limitation. I would be delighted if the Minister accepted my substitution of 15 for five; I would be even more delighted if he said that on reflection the Government would prefer to delete the limit altogether, because there are some long-standing wrongs in this area and the five-year limit does not seem sensible. I beg to move Amendment 51ZA.
Baroness Liddell of Coatdyke
My Lords, I support my noble friend in his amendment. The amendment seems particularly sensible and apposite, because at the time that this legislation was being crafted we were not aware of some of the mis-selling issues that were to emerge from the customers of energy suppliers. The last time I checked, there was something like 27 cases still pending with Ofgem, and that was before the announcement of the fines relating to mis-selling affecting Scottish and Southern Energy. Given the number and complexity of tariffs, many people will be checking whether they have been mis-sold.
It has been suggested that there is a danger that the mis-selling of electricity and energy in general could reach a stage where it matches the mis-selling of PPI and some of the financial services mis-selling. This would be useful for the Government to have in the armoury should that situation emerge. It is not radical; it is actually quite a simple measure. If we take into account that the most recent instances of mis-selling had been in the pipeline at Ofgem for around four years, my noble friend’s proposal to extend the time period from five to 15 years is measured and logical. I do not see this as greatly controversial but as a way of dealing with a problem that may be coming over the horizon and that would save recourse to additional legislation in the future. If the Minister cannot make a commitment today to support my noble friend’s amendment, perhaps this is something we might be able to return to on Report.
Lord O'Neill of Clackmannan
Following on from my two colleagues, it seems that mis-selling is endemic in certain areas of our public services—public with a small p rather than in the sense of Government-run.
A bank is as much a utility as the provider of electricity or gas. Mis-selling results in fines and punishments, which seem to be absorbed, and the public end up paying the fines through higher prices. We do not normally see a reduction in dividends as a consequence of this, but we might see a reduction in investment, which is one of the difficulties that we have if we clobber the utilities that want to invest. We require them to invest in order to sustain our supplies of power, gas and the like and, if we fine them very heavily, however understandable that is, we perhaps endanger some of that much needed investment. On the other hand, we are talking about the legitimate concern customers have in getting some kind of redress that they have not had in the past. That should also act as a deterrent to the companies so that they do not go about setting tariffs in the misleading and cavalier fashion that they have in the past.
We are talking about organisations that are persistent offenders when it comes to overcharging and misleading the public and, at the moment, we do not seem to be capable of deterring them. If we had simpler means for the public to get redress and for ensuring that these offenders are punished, we might begin to develop a deterrent culture, under which they would be a lot more reluctant to jump headlong into fiddling tariffs in the way that they have done recently—usually at the expense of not just the vulnerable but the whole spectrum of society. As we do not always know the full character or nature of the abuse, it is about time that we tried to introduce some more blanket form of deterrence. To my mind, a blanket form of deterrence in the form of easier access for the public to seek redress would be a major caution to these potential persistent offenders, which are in the dock at the moment as far as a large section of the community is concerned.
Lord Whitty
My Lords, if something is unprovable, redress will not be awarded.
Baroness Liddell of Coatdyke
I am very grateful to my noble friend for giving way but the noble Lord, Lord Deben, referred to the financial services industry. The whole issue around the mis-selling of personal pensions covered a period of between 15 to 20 years. One of the reasons why there had to be redress there was because the entire financial services industry had been damaged. Our energy suppliers are being damaged at the moment. I remind noble Lords of the statement by Warren Buffett that it takes 20 years to build a reputation but five minutes to lose it. We owe a debt to the industry to make sure that it operates with the highest possible standards. One way of doing that is to support the amendments that my noble friend has put forward.
Lord Whitty
My Lords, my noble friend has expressed the position far more precisely than me. I underline her comments. I will not pursue the point today but I ask the department to reflect on it and on how it will justify to the public that there should be a lower level of potential redress in the energy sector than there is in the financial services sector. I just ask that question.
In relation to collective redress, I believe that the Government, the Minister for Consumer Affairs and the noble Baroness, Lady Verma, who is replying for her department, have moved some way to recognise the need for consumer redress to be dealt with on a collective basis on occasion. It is particularly important that that is provided for in the regulated sectors. The amendment that I am proposing would allow the Minister to come forward with a whole range of potential forms of collective redress. Most of those would be less expensive than individuals taking cases themselves and would take less time. They could, indeed, be pursued by intermediaries, but the aggregate cost to consumers and the industry would be significantly less than if every single consumer, or even 10% of consumers, started to take individual cases through the courts, with each one taking time to reach a conclusion. I cannot see that collective redress is ever going to be more time-consuming and costly than having a range of thousands of individual redress cases, whether they are taken through the ombudsman, the economic regulator or the courts.