Financial Guidance and Claims Bill [HL]

Debate between Lord Mackay of Clashfern and Lord McKenzie of Luton

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, as we have heard, these amendments would add two types of services to be brought within the definition of claims management services and hence within the regulatory provisions provided for in the Bill. The amendments were introduced with some passion. We support both of them.

We heard from the noble Lord some of the unacceptable behaviours of those delivering these services which warrant such inclusion. As part of the rampant compensation culture, we have heard about holiday sickness claims, which we will come on to debate, and artificial claims being stirred up by advertisements. Of course, medical reporting organisations and credit hire companies are involved in the claims process for road traffic accidents, providing medical reports and temporary replacement vehicles—an important service, perhaps, but it should be undertaken and conducted properly.

By way of background, we make it clear that we support the provisions in the Bill which enable the regulation of CMCs to transfer to the FCA but need to be reassured that it will be properly resourced to meet the totality of its new tasks—a point touched on by the noble Viscount, Lord Trenchard. The FCA currently regulates around 56,000 authorised financial services firms.

At present there is an exemption, which the noble Lord, Lord Hunt, touched on, from the regulation for claims management companies which employ solicitors on the grounds that such entities are under the jurisdiction of the Solicitors Regulation Authority—which, incidentally, bans cold calling. However, it is suggested in some quarters that the SRA regulation is less rigorous than the current MoJ regulation of CMC activity and as a consequence some CMCs are changing their business structures to take advantage of this. Is the Minister satisfied that there is no weakening of the regulation through this route?

There is another, tangential matter I would like to raise, of which I have given notice to the Minister—frankly, seeking a meeting rather than a detailed answer to an amendment. This is to do with tax refund companies. These are businesses which help people who have had too much tax deducted at source from their wages complete and submit the paperwork required by HMRC to claim back the overdeducted tax. There is absolutely nothing wrong with that—it is a vital service. This will include employees who have spent their own money on tax-deductible employment expenses; for example, care workers who do mileage in their own cars. Tax refund companies generally make their money by making high volumes of low-value, simple claims that they charge fees for. While some of these tax refund companies make sensible claims and charge proportionate fees for the service they provide, others are less scrupulous. It is these which we want to focus on. It is worth noting that tax refund companies’ bread-and-butter activities—refunds based on unused personal allowances —have recently been curtailed by HMRC’s auto-reconciliation service, which makes it harder for them to stay in business.

How do the companies work? There are some similarities with the points made by the noble Lord, Lord Hunt. They are mainly online businesses, typically with fun and appealing websites that contain eye-catching claims such as “Let us maximise your refund” or “We make claiming your refund easy”. They may somehow imply that they have an inside track with HMRC. They often pay for advertising space so that they appear at the top of search engine results, where their ads are not necessarily distinguishable from organic search results by those who are not IT-savvy. The costs vary but there can often be two elements: a minimum admin fee—the Chartered Institute of Taxation says that it has recently seen a minimum fee of £90—and a charge based on a percentage of the refund, such as 20%. Percentage fees of up to 40% for relatively straightforward claims have been seen, which are a scandal. The company will normally mandate the refund back to itself in the first instance and collect its fee before transferring the balance to the individual. Often, the two fee elements taken together will outweigh the tax refund if it is small. Sometimes the companies add on charges for transferring money to a bank account, which they are not always transparent about. The pricing structure incentivises poor practices such as putting in inflated or fraudulent claims.

Who do these companies target? It can be workers who are unaware of or confused by the rules around when a refund might be due. The work-related travel expense rules are a particular example. It can be people who may have an inkling that they are due a refund but who lack confidence or knowledge of the tax system to initiate a claim themselves, or those who could probably organise a claim but do not have the time or the inclination.

Some tax refund companies meet a genuine need in the market and operate according to appropriate standards but the area is unregulated, like the issue we have just been debating, and there is a huge spectrum of providers. The Chartered Institute of Taxation’s report on tax refund companies identified a range of consumer protection issues with some of the more exploitative agents and made pages of recommendations. While some of these were taken up, many were not. We acknowledge that HMRC has invested in improvements in certain areas by offering online channels to apply for refunds, restricting agent access to taxpayers’ pay and tax details, and dealing with refund agents who gave the impression that they were in some way affiliated to or approved by HMRC. However, tax refund companies continue to proliferate, which suggests that things are still too complex or that taxpayers are still being swayed because of things such as overinflated promises or misleading information as to fees.

I apologise for taking the Committee’s time to focus on this issue. I was not quite sure how to address it otherwise. My purpose is to give this an airing and to seek from the Minister the opportunity of a meeting in due course, together with the Chartered Institute of Taxation and the Low Incomes Tax Reform Group, to delve further into the issue. Having said that, I reiterate that we support the two amendments proposed by the noble Lord, Lord Hunt, and do so enthusiastically.

[Lord Mackay of Clashfern (Con)]

My Lords, I very much support the amendments proposed by my noble friend Lord Hunt of Wirral. I just wonder whether regulation should sometimes encompass outlawing these activities altogether. It is probable that the amendment is sufficiently broad for that to happen but some of these activities may well be best outlawed rather than regulated.

Cities and Local Government Devolution Bill [HL]

Debate between Lord Mackay of Clashfern and Lord McKenzie of Luton

Tuesday 21st July 2015 Lords Chamber

[Lord Mackay of Clashfern (Con)]

My Lords, one of the advantages of the Bill—as I have read it and, I hope, understood it—is that it is a receptacle in central government for the proposals coming from local government. There are not really any severe restrictions on that. There was one, on which we had a Division, that may well have resulted in an even more rigid arrangement than was in place or, indeed, than the noble Lord, Lord McKenzie, thought when he moved it. Anyway, I shall not go into that now.

Originally the Bill was intended to be extremely flexible on this question, with suggestions from any size of authority and any combination of authority. I entirely accept what the noble Baroness, Lady Hollis of Heigham, has said, with her great experience of local government. I am sure that there is scope for a great number of different types of co-operation that will have the effect of bringing forward the sort of proposals made by the noble Lord opposite when he was Deputy Prime Minister—at that time it was the north in particular, but this is about the possibility of co-operation throughout the country—that can give life to the economic aspirations of the people of an area.

[Lord McKenzie of Luton]

My Lords, as we have heard, my noble friend Lady Hollis has tabled two types of amendment to enhance the flexibility of the Bill. The first type of amendment, Amendments 2 and 8, seeks to enable combined authorities or individual authorities to which functions have been transferred to pool some or all of these functions with other combined authorities or local authorities. We hope that that in particular will find favour with the Minister, who might not even need these amendments to do that.

The second type, Amendment 6, would give a wide discretion to the Secretary of State to establish combined authorities or economic prosperity boards—we have not debated them much during the course of the Bill—by combining different functions in different areas. That would require the consent of appropriate authorities, and would have to demonstrate the improvement of statutory functions. This amendment in particular would enable local authorities to be part of one combined authority for some functions and part of another combined authority for others.

My noble friend has argued a strong case about the needs of medium-sized cities, particularly those in county settings. As we know now, this is not just a theoretical issue; it has been driven by her own experience in Norwich and by her wide contacts in other areas, which she spoke about today, who have identified with her analysis. As my noble friend has said, we are grateful for the opportunity yesterday to discuss these issues, and we anticipate an encouraging response in relation to Amendments 2 and 8, even if Amendment 6, about the opportunity for someone to be part of one combined authority for some functions and another combined authority for others, may be a step too far at this stage. We look forward to the Minister’s comments on that.

This is about ensuring that all areas have the opportunity to engage effectively with devolution opportunities. I conclude with a suggestion for the Minister about possibly convening a conference for the type of authority that my noble friend has identified to flesh out some of the very important issues that she has raised.

Cities and Local Government Devolution Bill [HL]

Debate between Lord Mackay of Clashfern and Lord McKenzie of Luton

Monday 13th July 2015 Lords Chamber

[Lord McKenzie of Luton]

My Lords, this has been an extensive and good debate and the time moves on, so forgive me if I do not respond to each point that noble Lords have made, whether it was as a trip through history about what has happened to elected mayors or the stage that we have reached today. The problems with the London system, some of the time, and the difficulties that other areas have found were mentioned.

I would like to challenge the proposition that the amendments are wrecking amendments. I am bound to say to the noble Lord, Lord Heseltine, that that really is not the case. It was not the intent and is not their substance. If we look at the thrust of all the amendments that are before us today and will be on Wednesday, they are overwhelmingly about trying to improve the Bill and achieve the very thing that he wants and campaigns for. It is unhelpful to characterise these amendments as wrecking when, in total, we are trying to improve the Bill so that devolution can be delivered across the country.

The noble Lord, Lord Shipley, asked the pertinent questions about major powers—what is in and what is out—and of course we got the usual answer. I do not think that anybody sees it as a credible response to say that nothing is being imposed on people because the Bill is a framework Bill, in circumstances where the Government make it absolutely clear from the start that you can get certain powers only if you have an elected mayor. That is not a process of not imposing anything on anybody. It is making sure that the price paid is very clear up front, in some circumstances. It is very unclear in other circumstances what price will be asked, depending on what powers are available. I am bound to say that whether we are in favour of or against elected mayors instinctively, we did not see it as a ladder up which budding leaders could climb—and even less so a retirement job for ex-Cabinet Ministers. I did not think that that was the process we were involved in today.

The noble Lord, Lord Heseltine, made a powerful speech reiterating his passion for devolution and what it could lead to. We support all that but he himself said that if somebody comes up with something it will be considered, so seemingly from his point of view there is not an inevitable imposition of an elected mayor. The noble Lord may feel that something credible would not come up, and he may or may not be right. But even he seemed to recognise that there should be scope, which is effectively what Amendment 3 is seeking. It may be, in the terms used by the noble and learned Lord, Lord Mackay, that the wording is imperfect but then it is the job of government at Third Reading to tie that up.

[Lord Mackay of Clashfern]

I am sorry to interrupt—it is not my habit—but the present Bill simply gives a discretion to the Minister, absolutely free. There is no limit on that discretion to having an elected mayor. It is a discretion to consider the particular proposals made. I understood the Government to have said in the debate that the idea of an elected mayor, while very attractive from their point of view, was not essential for every proposal that might come forward.

[Lord McKenzie of Luton]

My Lords, we accept that there is a discretion but we know that that discretion will inevitably be operated in certain ways in certain circumstances. The Government will insist upon an elected mayor and the discretion, which I accept is permitted under the Bill, will be exercised in a certain way. This is about trying to get clarity or preclude that being an inevitable part of a deal. If somebody wants an elected mayor and can put forward governance arrangements and credibility around all that, fine. But if they do not, why should that not inevitably be considered fairly by the Government in the negotiations which go on?

[Lord Mackay of Clashfern]

Nothing that I have seen anywhere so far says that the Government can give powers under these proposals only if there is an elected mayor. It is left completely open. All this seems to be based on is some suggestion that that is what the Government want to do. However, the Government have proposed a Bill that does not have that in it. I cannot myself see why that discretion should be limited.

[Lord McKenzie of Luton]

The noble and learned Lord is right that there is a discretion in the Bill, but we know, alongside that, that the Government have made it absolutely clear that an elected mayor will be insisted upon in a range of circumstances. We are seeking to determine that that insistence should be precluded, not that the option should not be available, if that is what a combined area wants. The starting point should not be that you must have an elected mayor in that range of circumstances.

It seems that there is some recognition that there should be discretion for combined authorities to come forward—the Minister has said that. It is all very well recognising that, but at the same time they are saying, in this place and in the Chancellor’s Statement at the other end, that you have to have an elected mayor, come what may. There is an inconsistency between those positions, and this amendment is trying to clarify that inconsistency. We do not think that there should be that insistence. If people want this and can come forward with a credible model, fine; but if the starting point of these deals is that you must have an elected mayor, that is wrong and we oppose it.

This a great shame because there is substantial agreement across the Chamber, I think, about the thrust of the Bill. The one point where it jars is this obsession and insistence on an elected mayor—not in the Bill itself but in terms of how we know it will be applied and how we know it is being applied in the case of Greater Manchester and other areas. That is the point that divides us. Given the support that we have across the piece for the Bill, it is a great shame that we have to divide on this, but I propose to divide and test the opinion of the House.

Welfare Reform Bill

Debate between Lord Mackay of Clashfern and Lord McKenzie of Luton

Wednesday 25th January 2012 Lords Chamber

[Lord Mackay of Clashfern]

My Lords, it will be fairly obvious to most of your Lordships that these amendments are not entirely unrelated to the amendment that I am going to move in a little while. I am not certain of this, of course, but I have a feeling that the proposed amendments regarding the test for the discretion to be used have arisen out of discussions that I have had, which my noble friend Lord De Mauley has been at too, about the effect of the test in relation to charging. I will not elaborate on that now.

I would just be interested to know on what basis this test was originally put into the Bill. It must have been the subject of instruction; parliamentary counsel are extremely creative, but only on the basis of what they are asked to do. They are very good at finding words to express what you want. I wonder, and my noble friend may know the answer to this, what they were asked to do in the first instance. Does this reflect a change in the underlying request or not?

The third amendment concerns the review. That was certainly mentioned to me by the Secretary of State when I met him a week yesterday. I am entirely in favour of that. However, I suggested to him that it would be fair to do it on my basis and that that would be a real test of how good my suggestion was. However, it was suggested, “No, we will test it on my basis”—that is, on his basis. Therefore, from my point of view there is not much of an improvement as yet, but who knows what may happen? At present, the amendment is very welcome but, so far as I am concerned, it does not help me at all.

[Lord McKenzie of Luton]

My Lords, when the noble Lord, Lord De Mauley, introduced these fairly specific amendments, we had a bit of a broad sweep about the background to where the Government were going on child maintenance. I start by welcoming the £20 million of additional funding that has been announced. The noble Lord said that the Government were seeking to introduce tough enforcement and collection, with non-resident parents not being able to escape their obligations, and with HMRC gross data being used for the relevant calculations. We can sign up to that. In fact, we dealt with that in the 2004 child maintenance legislation, so that is in place; it is not new.

The noble Lord referred to the cost of the scheme—£450 million a year. One of the problems is that three schemes are operating side by side through a transition. I think it was originally planned that by 2012—this year—we should be down to one scheme based on gross data, which should significantly reduce costs. However, I think that has been somewhat delayed by the Government.

As regards tough enforcement and collection, following a question that I raised in Committee, the noble Lord wrote to me indicating that not all the powers included in the 2008 Act had been brought into force. If I am wrong on that, he may take the opportunity to correct me.

Amendments 62BL and 62BM appear, at first reading, to make it harder for parents with care to access the statutory maintenance service. The Bill as it stands provides for applicants to take reasonable steps to establish whether it is possible or appropriate to make maintenance agreements outside the statutory system. A key part of the Government’s reform of child maintenance was supposed to be the introduction of the gateway referred to by the noble Lord, the purpose of which is to ensure that all clients consider the range of their child maintenance options so that they can be directed into the family support services where appropriate. The Government’s White Paper states at paragraph 10 on page 18:

“In some cases the gateway will be a step towards an application to the statutory scheme. Where the parent wishes to pursue that and states clearly the reasons why, the conversation about other options available will be closed and they will be assisted in moving to make a full application”.

There were concerns that this process would be a way of screening out parents, particularly parents with care, from the statutory scheme. These were heightened by the potential loss of the statutory requirement to maximise the number of children benefiting from effective maintenance arrangements, which is an obligation of CMEC but is not to carry over to the successor—the executive agency—when that comes into being. Just a few hours ago we received a letter that purports to provide further clarity to the Bill. The noble and learned Lord, Lord Mackay, touched pertinently on that point. I am bound to say that it is regrettable that once again this information is released so close to our Report sitting. A crucial paragraph in that states:

“Therefore, we are now in a position to provide further clarity to the Bill by making it clear that the only engagement required prior to accepting an application to the statutory scheme will be to invite the applicants to have a telephone call with an adviser to discuss their options”.

Like my noble friend Lady Sherlock, I would like better to understand what that means.

If this is the interpretation that the Government put on the two amendments, it will be important to have this on the record. However, I am bound to say that such an interpretation does not flow readily from the wording, which requires the applicant to,

“consider with the Commission whether it is possible to make such an agreement”.

The term “consider” at least implies a more deliberative process than just a phone call. The process being “with the Commission” suggests the two parties having to agree on some sort of basis. However, if this is not what is intended, it would be very important to have that on the record. Given the lateness of this item in our deliberations, we may have to return to this matter at Third Reading.

The cynic might say that this changed position is an attempt to undermine the amendment in the name of the noble and learned Lord, Lord Mackay of Clashfern, by removing, in relation to Section 9 of the Child Support Act 1991, a requirement for an applicant to take “reasonable steps” to establish whether it is possible to have voluntary arrangements. We would not accept that, and the noble and learned Lord’s amendment continues to have our full support and stands separately from these amendments.

However, perhaps the Minister will tell us what the future of the gateway service is to be. To be fair, it was always envisaged that it would start by a telephone offering, but is that now to be its steady state? If not, and if it is to be developed into a more extensive engagement, how would that sit with the new government amendments?

To be clear, we have acknowledged the benefit of voluntary arrangements and the prospects of them being more sustainable. We support the development of family support services. We legislated to remove the requirement for benefit claimants compulsorily to use the statutory system and provide what has become the option service. Our strong concern in doing so was not that thousands would rush to use the free statutory service, but that parents with care would drift out of the system and fail to make arrangements at all.

As to Amendment 62CA, we would support a review of fees regulations. That does not mean we accept the structure of the fees proposed. We would prefer it to be done on the basis of the noble and learned Lord’s amendment.