Update on the UK Steel Industry
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford
Lord Stevenson of Balmacara (Lab)
My Lords, I am grateful to the Minister for repeating the Statement made earlier in another place.
Steel is the foundation of many of the UK’s most important manufacturing sectors, including aerospace, defence, automotive and construction, and the threats facing it show no sign of abating. Countries such as China are engaging in ruthlessly uncompetitive practices which are destroying our steel industry. Central to ensuring that our steel industry survives and thrives is the urgent need for an industrial strategy, which has not yet been apparent.
The Chancellor has declared that Britain will be,
“carried aloft by the march of the makers”,—[Official Report, Commons, 22/3/11; col. 966.]
but manufacturing exports have slumped and manufacturing output is still below its level of seven years ago, before the crash. Since this House rose for the Easter Recess, the problems in the UK steel industry have turned into a full-blown existential crisis.
I welcome the long overdue admission from this Government that it is their duty to help find a future for UK steel making. I also welcome the Secretary of State’s warm comments about the role played by the unions, in particular by Community—which, of course, points up the absurdity of the Government’s proposals in the current Trade Union Bill. I also note the reference in the Statement to the invaluable work being done by the First Minister of Wales, which we echo.
Our thoughts need to be focused on the uncertainty and distress now being felt in Port Talbot and, despite the welcome news of a conditional agreement between Tata and Greybull, in other steel plants in the UK and the host of small and medium-sized businesses which depend on them. The Secretary of State mentioned his respect for the hard-working men and women of this vital industry who need help. I hope that what is now happening and prompting this response by the Government today is not too little, too late.
I have some questions for the Minister. Given that the Scunthorpe deal took nine months to reach, and in light of the reference in the Statement to Tata as “a responsible seller”, can the Minister tell us how long Tata is willing to keep the Port Talbot plant operational while a buyer is found? Will she confirm that it is the Government’s intention to ensure that any sale is of the integrated operations there? Will she also confirm that the pension arrangements, both current and future, entered into by Tata with its staff will be part of the sale? This is important for those affected.
Can the Minister confirm that the Secretary of State will contact all the present customer base and reassure them that these plants have a viable future and will remain open for business so that they can be confident enough to continue placing orders? In that respect, can she confirm that the IP held by Tata will be part of the deal?
On procurement, will the Government finally accept that future public sector procurement arrangements, from defence to construction, need to do more to support the British steel industry? It should not just be “easier” to buy British; it should be mandatory.
Lord Stoneham of Droxford (LD)
My Lords, six months ago—I was slightly surprised that it was six months ago—these Benches advocated the Government setting up a Minister-led steering group to look at the whole range of problems of steel and develop a strategy to save what we could of this great industry. All the impression of the past few weeks is that the Government have been running around like a rabbit in the headlights, with the local MP knowing that Tata was going to make a key decision on Port Talbot but the Minister responsible not knowing so. Have the Government used the past six months to develop a strategy for steel and, if not, why not? What is the Government’s industrial strategy towards steel?
National Minimum Wage (Amendment) Regulations 2016
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford
Lord Stevenson of Balmacara (Lab)
My Lords, I thank the Minister for introducing this statutory instrument. I also congratulate her on her brilliant sense of timing. She has clearly been having acting lessons—to be able to pause so gracefully to allow those who do not want to hear her to leave is a masterpiece in timing from which we could all learn.
In its 19th report of the current Session, the Secondary Legislation Scrutiny Committee chaired by the noble Lord, Lord Trefgarne, drew these draft regulations to the special attention of the House on the grounds that they give rise to issues of public policy likely to be of interest to the House. We owe a considerable debt to this hard-working committee, which has once again done your Lordships’ House a great favour in helping us hold the Government to account by drawing this SI to our attention. Therefore, the Minister should not be surprised at the Motion. She should look to the wider context within which this is placed because we are not against the principle, but we think the committee has made some important points.
Statutory instruments have a major impact on people’s lives so it is right that they are given proper scrutiny in Parliament. As a responsible and loyal Opposition, we take pride in doing this and intend to continue to do so. However, as was made clear by my noble friend Lady Smith in the debate in your Lordships’ House last week, it is important that the Government also act responsibly and do not abuse the trust we should place in this process by trying to slip through substantial and far-reaching changes. Just because the power exists in primary legislation is a necessary but not always sufficient reason. When she responds to this amendment, will the noble Baroness share with us whether the question of using primary legislation for this important measure was considered?
The SLSC’s report says:
“It will fall to employers to meet the cost of the increases in employees’ pay. BIS puts the estimated total cost of the NLW’s introduction at £1,138.7 million in 2016–17”.
The report goes on:
“BIS says that business reactions to increased labour costs can include reducing profits, reducing the number of hours worked, restructuring their workforce, increasing prices, increasing the productivity of their workers, or substituting younger workers aged less than 25”.
As the report highlights, this response raises a number of questions about what work has been done by BIS on whether the benefits of the national living wage to low-paid workers could be offset by any or all of these business reactions. The department’s response—I think this was the reason that the committee picked up this point—was that there were too many uncertainties for a reliable estimate of the cost to be given. The SLSC is surely right to highlight this as a major deficiency in a policy. When she responds, will the Minister give us a bit more detail about what modelling has been done on likely business responses?
I accept, as has the Regulatory Policy Committee, that it is difficult to monetise these options but even so it surely would not be difficult to give a broad-brush assessment of what the department thinks is likely to happen on the ground. A significant trend towards any or all of these options will materially affect the benefits anticipated and if we accept the ripple effect described in the impact assessment it will flow to some 6 million hard-working but low-paid people.
Secondly, the SLSC report points out, as the Minister said, that BIS accepts that non-compliance with the national minimum wage may increase. In the excellent impact assessment—I pay tribute to officials for the work they have done on this—the detail included spells out the measures that are going to be taken by BIS, some of which the Minister mentioned. There are what we might call carrots covering various allowances and tax reductions although it is fair to point out that these will not compensate either in total or in timing for the increased costs being transferred to millions of businesses, particularly those which are small or medium-sized. A very good example of this is the reference on page 29 of the impact assessment which says that, “Funding from the apprentice levy will be put in the hands of employers to support training. This will improve worker productivity”. I invite the Minister to set out for me in writing how the additional cost of the apprenticeship levy, which is intended to be borne by larger employers, translates into a compensating financial benefit for the higher labour costs being transferred to the SME sector.
In truth, the stick, as described by the Minister, is the proposal to double the financial penalties for companies which do not pay the new national minimum wage. BIS has confirmed that extending the coverage of the statutory wage floor and adding complexity may increase non-compliance. Will the Minister set out, in more detail than she has already, how she will comply with the SLSC’s request for the Government to publish more information in future and thus satisfy the wish expressed by the committee that Parliament can properly judge the extent to which compliance with the new rate delivers the expected benefits to employees?
There is a good section in the Explanatory Memorandum on the equalities impact of the new proposals and the duties of the department in this regard. It is demonstrated within the Explanatory Memorandum that low-paid work is most prevalent in some sectors, such as retail, social care, hospitality and cleaning. It also appears to be more prevalent in part-time work, shift work, and among younger and older workers. It affects women more than men, and the largest numbers of people affected live in the north-west, the Midlands and Scotland. Clearly, if the policy works as intended, things should improve in these sectors, areas and groups. It may help to reduce the gender imbalance in pay, and we can hope that a more equal society will gradually emerge.
However, as the SLSC points out, there are real risks that non-compliance will rise and that changes in employment practice will vitiate the policy objectives. The national living wage will have national universal coverage for workers aged 25 and above, and the forthcoming publicity and other measures contained in the SI will help. Does the Minister agree that it may be necessary, and would certainly be desirable, to design additional measures to root out poor practice and illegality in the low-paying sectors listed in Table A3 of Annexe 2, the worst regions identified in Table A4 of Annexe 2 and among the groups identified in Chart A1 of Annexe 1 of the Explanatory Memorandum?
I do not want to suggest or imply that there is not a majority of responsible employers who are always going to abide by minimum wage legislation, but the figures presented in the report which accompanies the regulations are cause for concern and, as I am sure the Minister will agree, more can always be done.
Finally, I challenge the use of the term “national living wage”. As I understand it, the reason for the change from the NMW to the NLW is that:
“The Government believes that the economy needs rebalancing from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society”.
The impact assessment goes on to say:
“The UK can also do more to raise the wages of the low-paid compared to other countries—22% of UK workers are low-paid, compared to the OECD average of 16%”.
It explains that the OECD defines low pay as less than two-thirds of median earnings, but the initial introduction of the NLW will put those who receive it at 55% of the current UK median wage. Even if the aspirations for a £9 per hour living wage are achieved by 2020, it is estimated that that will get to only 60% of the UK median wage. In other words, this is more about raising the level of the existing national minimum wage than it is about introducing a genuine living wage. According to the Living Wage Foundation, the current UK living wage is £8.25 an hour and the current London living wage is £9.40 an hour. Will the Minister explain this anomaly? In particular, will she explain why the target for 2020 is only 60% of the median wage and why the Government are not trying to reach the OECD target of 66.7%? I beg to move.
Lord Stoneham of Droxford (LD)
My Lords, the Minister should not be surprised that we are having a debate of this nature. On this side, we fully understand the reasons why the noble Lord, Lord Stevenson, has moved his amendment. There is concern that the Government entered into this policy on the hoof. They did very little consultation or preparation for it. There are also signs that there were was not much cross-departmental consultation within government. The measure is designed, we think, to deflect attention from what was at that time the reduction of the tax credit policy. Like the noble Lord, Lord Stevenson, we are very concerned about the looseness of words to describe something that it is not. We have had in the housing area the concept of affordable rents, and indeed affordable housing, when they clearly are not affordable. Now we have the national minimum wage perverted into the national living wage. We welcome the increase but it is a deception to think that we will necessarily be able to reach what is a genuine living wage, as the noble Lord, Lord Stevenson, pointed out.
However, if this is the first step—and I accept that it is—to do more for low-paid employees and reduce subsidies to employers, then of course we welcome it. That initial step is acceptable, but there are a number of conditions. Clearly there was a lack of involvement of the Low Pay Commission in drawing up these original proposals. We accept what the Government have said—in future they will use the Low Pay Commission for advice on further increases, and in bringing together the national minimum wage with the so-called national living wage. But as the Secondary Legislation Scrutiny Committee pointed out, this is a big change: it involves £1.2 billion of costs in the labour market, and 6 million employees are affected. I must declare an interest here as chair of Housing & Care 21, which employs people who will be affected by these changes, although we largely pay well above the national minimum rate. The whole area of social care is particularly vulnerable. I know that the Government have made a number of initiatives on this, but obviously we will want reassurances that public sector contracts are seeking to push pay levels up, rather than contain them. Also, young people are excluded from these changes and no recognition is given to the extra costs of actually living in London. Therefore, the higher living wage should apply there.
We have a number of questions for the Government, some of which the noble Lord, Lord Stevenson, has already put. In what form will the Low Pay Commission’s advice be sought when it comes ahead of the Budget next year in setting the rates for 2017? What encouragement will be given by the Government to raise productivity, particularly in low-paid sectors? At the end of the day, if we wish to avoid inflation and unemployment, we have to raise productivity in these areas. What extra resources are going to be put into HM Revenue to deal with the extra policing of a much wider group of employees to ensure compliance? As the care cost cap implementation was delayed for five years at the start of this Government, what reassurance can the Government give that they will not delay that further, given the costs that will obviously be implied by these changes in the cost of social care? Finally, do the Government have any ambition to extend to those under 25 years of age the whole concept of the national living wage?
We cannot vote for this amendment to the Motion, because we set the direction of policy, but we do expect assurances from the Government for the ongoing investigation, particularly regarding the work of the Low Pay Commission. This measure generally supports our own policy of raising tax allowances and making sure that those at the low end of the pay market are paid a living wage.
Enterprise Bill [HL]
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford
Lord Stevenson of Balmacara
My Lords, I have been beguiling the Committee with the fact that I have had to act for several other proposers of amendments because sicknesses have left us a bit bereft. On this occasion, I can switch track slightly because here we are doing a decent thing in allowing some amendments on valuation to be debated on behalf of someone who cannot be present which I think he would certainly have tabled if he were here. We agree with them, so we have tabled them in our own right.
The noble Earl, Lord Lytton, has provided us with a brief which I will be drawing heavily on. However, as with the other amendments, I do not have the expertise to do justice to some of their individual elements. I suggest to the Committee that we take all the amendments that relate to valuation and the Valuation Office Agency together, which, if we do it cleverly and efficiently, will take us neatly to the witching hour of 7.30 pm, when we will be able to feel that we have done a good job. I will be imposing heavily on the good will of the civil servants briefing the Minister, but I hope that that will be sufficient. I am joined by the noble Lord, Lord Stoneham, who has put his name to one of the amendments.
The issue that unites all the amendments is that everybody involved in valuation agrees that the current arrangements for the business rates system, particularly the appeal system, are simply unsustainable. What is missing from the Bill is a balance between the need to remove ill-founded and speculative appeals with the need to preserve fair access to justice for those who feel that they have a case to argue.
At the heart of this, unifying all the amendments, is information, although I will speak specifically to the question of festivals, which arises in Amendment 52R. Therefore, most of my remarks will be about the generality of the VOA and how we may deal with it in future, but I will spend a few minutes on festivals.
We have drawn on work done by the Federation of Small Businesses, which also feels strongly about this. I think there is an alliance out there on this issue, and I look forward to hearing the Minister’s response.
Amendment 52F and those which are grouped with it, Amendments 52H to 52K and 52N, relate to whether information currently withheld by the VOA should be made available to those who have a genuine interest. I will not say much more than that, because that seems to be a point of fairness rather than a point of law: those who are being rated and having rates applied to them should be able to know the basis of that and to make judgments with their professional advisers fully informed.
Amendment 52G moves us to the billing authority and makes provision for disclosure of information about issues relating to a business improvement district scheme, which is a slightly different point but involves the same issue, which is that there is unlikely to be any way to judge what the non-domestic rates yield would be in a BID if you do not have access to that information. Again, limited disclosure would be in the best interests of all concerned.
There is no provision for an ADR ombudsman or other suitable arrangement in the VOA system, and Amendments 52L and 52P suggest that that gap needs to be filled. We would be grateful if the Minister would take that into account. Because of the way in which the UK has implemented the ADR legislation, a range of options is open, and we are not producing one solution against another, but it is fairly clear that there should be an outlet to an external agency such as an ombudsman.
The question of appeals more generally is raised in Amendment 52Q, in which we are also joined by the noble Lord, Lord Stoneham. The proposal in the Bill is that there should be an upfront fee for any appeal. That seems an odd thing to require. The people who will likely be most affected are small businesses, particularly those who are struggling to get started. It does not seem in the best interests of enterprise to require fees to be paid upfront which will not necessarily be returned if an obvious injustice is being done and redress for justice denied is not being provided.
On the question of festivals, we have become aware of the fact that the VOA has begun to raise invoices and seek money from people who have used agricultural land and buildings for cultural events and festivals. One can understand that, when previously rarely used assets are being used for a different purpose, there is obviously a question of whether fair taxation is being applied. It would be hard to argue that using land that was not being used for anything else for a business activity would raise a rateable question.
I hope that the amendment will set off in the Minister’s mind the suggestion that there is something a bit bizarre about constantly asking farmers and others to develop new ways of raising income and then, when they find one in the readymade form of a festival ready to come in on the site, not only to require them to pay rates for it but also to have a retrospective element. That seems rather unfair. I hope that, if only on the question of equity, the Minister might consider favourably the suggestion made by the festivals group that there should be no backdating. The situation may have changed, but that does not necessarily mean that those one-off festivals that have happened should suddenly be faced with very substantial Bills—we are talking about £50,000 or £60,000—when people have budgeted on the basis that there would be no such cost. In future, consideration should be given to some form of derogation for short-lived festivals of this type, when clearly there are economic benefits to the whole of the country and to the locality, and a good cultural effect that would be completely lost if the cost exceeded the income. We might be cutting off our noses to spite our faces. I would be grateful if the Minister could consider the amendment. I beg to move.
Lord Stoneham of Droxford (LD)
The noble Lord, Lord Stevenson, has masterfully summarised the amendments. I put my name to Amendments 52F and 52P in the interests of trying to improve the processes. In the interest of brevity and trying to improve the timescale, I am happy to give my support formally.
Enterprise Bill [HL]
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford(8 years, 6 months ago)
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Lord Stoneham of Droxford
I need to declare my interest as chair of Housing & Care 21. We built 1,000 homes last year. We have built far fewer this year but are very engaged in this intricate industry.
All the points have been made but I just wanted to say that this industry is very cyclical. The other feature of it is that it is dependent on a mass of subcontracts, so it is very complex. If we are going to do a review, now is a good time. We are at the beginning of the cyclical upturn and there is a concern to get work done. The whole capacity of the industry needs looking at because a lot of it was wiped out in the recession. Anything we can do to improve the capacity of the industry and make it more resilient is good. As sure as fate, whatever happens, there will be another recession and some of these problems will re-emerge. My whole experience of the industry is that it just goes suddenly dead. It is the most scary industry because people stop buying homes and it goes right through the chain, and then of course it is the small guy who loses out because he has no capacity to get his money back—he is down and dusted—and a huge part of the capacity of the industry goes with it every time. These measures are needed to build confidence in the industry, to build capacity and to allow it at the end of the day to produce more homes at less risk.
Lord Stevenson of Balmacara (Lab)
My Lords, I should declare an interest as my wife is a partner in a firm of solicitors and her expertise is in construction contracts. She does not talk to me about it so I do not know anything at all, but I still thought I should declare it.
This is the third time around the track on this particular topic. The quality of debate has not dipped; indeed, the interesting thing is that more people are now joining in. An emerging theme is now being drawn out, and I think it is a good one. For me, there are two points which have not been picked up, and I would like to reinforce them. First, as the noble Lord, Lord Stoneham, was saying, construction is an interesting sector and a very important one for the economy, so we must be very careful about it. The ONS produces figures on the progress of our recovery which always feature an element of construction. It is important at a local level and an everyday level but also in a macroeconomic way, and we should give regard to that.
The second thing is that there is a way that this could be sorted out by the sector itself, and it has not been. The contractual arrangements could be reformed, and the JCT, which has been mentioned, has indeed begun to think through some of these things. There are available options for people who want to make contracts that take advantage of them. But the interesting thing is that that has not happened. Something is going on here and that simple point has been made in some of the briefing we have received. There is “grand theft auto” of the working capital. The unfairness is that while this is a resource that should be of benefit to the contractors who are owed it at the end of whatever contractual period they have signed up for, it is withheld from them. The consequence of course is that it does not feature in their ability to raise finance for ongoing projects later on.
That is an important issue, which makes this practice very pernicious in the way it is applied. The original idea was that you held back the cash in case the constructor did not come back to do any remedial works that might be required. But as my noble friend Lord O’Neill said, this is a story from the past because contracting has got its act together now and is much better. Also, the contractual arrangements are better, so I do not think that it is as much of a danger as it was. My last project, which was a small one, was interesting. When you analysed the retentions money, it explained why senior members of the company kept popping up on our doorstep. The retention represented the directors’ bonus for completing a good project. They were aware of what was going on and they were very keen that we did not retain any money, and we did not. It is a fact that it is woven into the way in which these people operate, and it will be difficult to get out of.
Our amendments suggest that we already know enough about this for the Government to act. The consensus in the Room is that we should think about a review and then act promptly, but certainly set a more ambitious timetable of 2020 rather than 2025. In proposing our amendment, we simply add to the pressure that must now be felt by the department and I hope very much that when we come to hear the Minister, she will be able to respond to that.
Small Business, Enterprise and Employment Bill
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford(9 years, 1 month ago)
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Lord Stevenson of Balmacara
My Lords, perhaps I may take this opportunity to thank the Minister for the way in which she has led this long and incredibly complex Bill over the past few months. She has been exemplary in offering meetings and has made sure that we have been fully briefed by officials, for which we are very grateful. Whenever debates have raised issues that she felt needed further consideration, she has written to us, thus carrying on a practice started by her predecessor; while he was pretty good at it, she has been exemplary and has won hands down in that race.
We said at the beginning of the Bill that we would like to work closely with her if we could because the Bill was in the right place in what it was trying to achieve and there were many things on which we could agree. Indeed, we felt that in some senses it could have gone further. I hope the Minister agrees that that has proved to be of considerable benefit to the process of getting the Bill to the position it is in now.
I want to make sure that recognition is duly paid to my team, my noble friends Lord Mendelsohn, Lord Mitchell, Lord Young, Lady Hayter and Lady Jones, who have all had to appear at various times during the passage of the Bill because it covered so many different aspects of the Government’s work. We also had the innovation of having a Back-Bench liaison Peer, my noble friend Lord Watson of Invergowrie. As well as taking a particular interest in the PSC register, he also worked very hard to make sure that Back-Benchers were fully involved. That helped to stimulate the debates and get us through the work. We have also benefited from a very hard-working legislative assistant, Nicola Jayawickreme, our former apprentice in our office at the end of the corridor, who has grown in stature and confidence as this legislation has progressed. So apprenticeships do work.
Having spent a lot of time in areas that perhaps we did not expect to when the Bill was first introduced, and having become expert in the intricacies of how pub companies and pub tenancies work and the implications of various activities in that area, as well as lots more, let us say “Cheers” to this Bill as we wish it on its way.
Lord Stoneham of Droxford (LD)
My Lords, I endorse the words of the noble Lord, Lord Stevenson, by thanking the noble Baroness, Lady Neville-Rolfe, for her unfailing courtesy and competence throughout the transaction of the Bill. I also thank the noble Lords, Lord Mendelsohn and Lord Stevenson, for their efforts to improve the Bill and to work with all of us who have been engaged on it over the past few weeks. I thank my noble friend Lady Janke, who has been assisting me on these Benches. I particularly thank all the officials who have dealt with our replies and the detail of queries that we have had on the Bill throughout the past few weeks.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford(9 years, 5 months ago)
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Lord Stoneham of Droxford
My Lords, I shall speak briefly in support of my noble friend Lord Clement-Jones. As I said in Committee, this is a very important change which is needed in this sector and follows what has already been done in banking and utilities. The current practice is anti-competitive because it reserves competitive offers for new and switching customers at the expense of existing customers. I accept that there are problems about how we can actually make the change. Ofcom clearly wants to do it. The complication arises because, as we know, the landline and broadband change applying to BT Openreach, which also affects Sky, TalkTalk, Post Office and EE broadband, is already in place, and now we want the final stage so that all the mobile operators are covered. There is also the issue of bundling as regards the connection with TV, satellite and so on. Ofcom is currently carrying out a consultation on that. We need to hear from the Government when that consultation is likely to be concluded, whether the Government fully support Ofcom in pushing that forward and whether Ofcom now has the power, in the Government’s view, to initiate it once the consultation is over.
Lord Stevenson of Balmacara
My Lords, Amendment 49, which we support, would amend Section 3 of the Communications Act 2003, requiring Ofcom to promote competition and consumers’ interests by introducing a gaining provider led—or GPL—switching regime to the communications market.
It is obviously clear from what we have already heard and what we heard in Grand Committee that simple switching processes are vital to the health and future of all markets. While banking and energy customers are able to switch by contacting their new provider of choice, in mobile, pay TV and broadband customers have to contact their original provider before switching. The current losing provider led process is complicated and slow, works against consumers and distorts fair and open competition.
What is this mystery all about? As outlined by previous speakers, we have a situation where the Minister assured noble Lords, when she responded to this debate in Committee, that the Government have considerable sympathy for GPL switching in the UK. She said:
“In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board”.—[Official Report, 5/11/14; col. GC 692.]
That seems to be a supportive statement. Given that GPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, it is incomprehensible that it does not yet operate for mobile services or for pay TV. In Grand Committee, the Minister said that Ofcom had the power to mandate GPL switching for all communications services. However, as we have just heard, that does not seem to be Ofcom’s view. Indeed, so much does it disagree with what the Minister has said, it had to write to correct her after the debate in Grand Committee. It is worth quoting:
“We have said consistently that legislative reform to support GPL switching would enable us to address switching issues more quickly and directly, and make it easier for consumers to take advantage of the competitive UK communications market. Therefore we were pleased both with the government’s full support for Gaining Provider Led switching”—
in the July 2013 paper—
“and with the subsequent amendment tabled by Lord Clement-Jones … which would give effect to this aspiration by giving Ofcom a clear duty to mandate GPL switching”.
It is clear that Ofcom not only feels it does not have the power, but would welcome the certainty provided by legislation in the Bill. I suspect that that has more to do with the fact that this is a very litigious market within which a number of providers will probably seek judicial review on other issues if there is any doubt at all over whether the powers exist. It seems not so much a Christmas present but a necessary condition for the improvement of our markets that we should go ahead with this. I do not understand why the Government are reluctant to do so. I hope that they will be able to clear this up by supporting the amendment.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Lord Stoneham of Droxford(9 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Stoneham of Droxford (LD)
I rise on behalf of my noble friend Lord Clement-Jones, who has a conflicting commitment this afternoon.
This amendment—I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, for their support for it—is designed to ensure that consumers experience a consistent, simpler and quicker switching process when seeking to switch communication provider, led by the receiving provider.
UK consumers, now more than ever, depend on a range of communication services. Ofcom research has shown that 94% of all UK adults own a mobile phone and that 15% of UK consumers live in a mobile-only household. It is therefore vital that the communication market works well for UK consumers. However, the current switching processes, not just for mobile phones but across the communication sector, are complicated and slow, working against consumers and distorting fair and open competition.
Recent reforms mean that banking and energy customers are able to switch by contacting their new provider—a system known as gaining provider-led switching. However, mobile, pay TV and broadband customers must contact their original provider before switching.
Under current legislation, communications providers operate a losing provider-led switching regime, which forces consumers to contact their current provider to terminate their old contract before being able to switch to a new provider. Not only is this time-consuming and can lead to breaks in service or periods of double-billing when switching between providers but it has a negative impact on competition and pricing.
Consumers who threaten to switch are usually offered preferential deals in order to stay. The retention offers made to these consumers are effectively subsidised by the supplier’s remaining customers, who pay higher prices. Competitive offers are often reserved for new customers or those who attempt to switch, with existing customers often losing out. The existing complicated switching regimes across the communication sectors are leading to real consumer harm. For example, Ofcom data show that of the 9 million UK mobile customers who switch annually, as many as 1.2 million are double-billed or experience a total loss of service. The hassle and confusion for consumers deters them from switching provider. By contrast, the car insurance market has a switching level of 38%, compared with 9% in the mobile and broadband market and just 3% in digital television.
Forcing customers to contact their original supplier often leads providers to operate poor retention practices. The best deals are hidden away and are available only to those who can play the system. This means that the vast majority of UK consumers, including the inactive, the out of contract and the vulnerable, face higher prices while only a minority of savvy customers, willing or able to game the system, get the best deals. A gaining provider-led system forces operators to place their best deal on the open market, accessible to all.
When Ofcom attempted to introduce the gaining provider-led switching system in 2007, it was subjected to appeals from the major mobile networks. Ofcom, in its 2010 strategic review of switching in telecoms, concluded that gaining provider-led switching systems perform better than those led by the losing provider, they are easier for customers to navigate and they are more likely to support competition, yet there has been no progress since then. This amendment would free the path for Ofcom to achieve the outcome it sought as long ago as 2007.
By contrast, last year Ofcom mandated a gaining provider-led switching process on BT’s Openreach network, which supports the services of BT, Sky, TalkTalk, the Post Office and EE’s broadband. This will be in place by June 2015, meaning that customers will need to contact only the provider they are moving to, not the one they are leaving. This will simplify switching for landline and broadband services and will also apply to BT’s Sport TV. In fact, the gaining provider-led system has been acknowledged by both government and the regulator as the best switching system.
In July 2013, DCMS published Connectivity, Content and Consumers, which set out its plans for the communications sector. In it, the department supported a move to gaining provider-led system switching across all communications services. It said:
“We recognise that switching processes work better for consumers when only one call needs to be made to the company the consumer wishes to switch to for the switch to happen, and there is no need for consumers to contact their existing provider … Working with Ofcom, we will do everything we can to move towards a system of gaining provider-led switching across the board. Consumers are increasingly buying services in bundles, for example, phone, broadband and pay TV. This can make switching providers more difficult as there are different switching processes attached to each component of a bundle. We will legislate to give Ofcom a duty to ensure a consistent and effective experience for consumers switching between bundles”.
Given that Ofcom has consulted extensively on switching processes, the Government's subsequent reluctance to legislate is frustrating and baffling for all concerned. On behalf of consumers, Which? has confirmed that it agrees and supports this amendment precisely because it would introduce gaining provider-led switching across all telecommunications markets, drive forward competition and significantly improve the consumer switching experience, enabling people to switch with greater ease and convenience.
This amendment would bring communications providers into line with other markets—including energy and personal current accounts—which operate a gaining system. It would force companies proactively to offer best deals on the open market, rather than withholding the best offers to retain customers threatening to switch. Having a single gaining provider-led switching regime across the whole sector would alleviate confusion around the process of switching, and would help give consumers a consistent experience when switching. Increasingly, consumers view broadband, landline, TV and mobile as complementary services.
If consumers did not have to contact their existing provider before switching, there would be more incentive for suppliers to focus on retaining customers at all parts of the journey rather than at the end point. This would result in more competition and better- value deals for all consumers, with prices harmonising across customers of the same supplier. Gaining provider-led switching in communications markets is already standard practice across most other EU countries, where it works well. I hope that the Government will support this amendment and get this policy moving in the interests of consumers.
Lord Stevenson of Balmacara (Lab)
My Lords, I am sure that I saw the noble Lord, Lord Clement-Jones, only a few moments ago, asking questions in the Chamber, so his conflicting engagement is extremely irritating because we were looking forward to his contribution here. Of course, we now have his parasitic packaging analogue who is gradually inhabiting all of his previous positions on matters to do with this, and we should not complain, because he once again has managed to introduce a very complicated and not very easy to grasp topic with exemplary clarity, and I thank him for that.
We on this side support the amendment in the name of the noble Lord, Lord Clement-Jones; indeed, we signed up to it for very much the same reasons as those just explained by the noble Lord. It is a huge gap in the telecoms area that there is no simple and easy switching regime: such a regime would be the foundation of ensuring a competitive market that would drive down prices, while at the same time empowering consumers. Who could be against that?
The problem we have at the moment is completely the reverse, because in the mobile industry—but also in broadband and pay TV—there are very complicated switching processes. These are huge disincentives to consumers to changing provider and this can lead to very real consumer harm in the form of either double bills—which have been well reported in recent days—or a loss of service when providers are switched, because of the difficulty of making all the ends join up.
We think that the gaining provider-led system across the communications sector will make a huge difference. It puts the customer in charge of the process; it prevents competitors in the market using different and complicated switching processes—which, as the noble Lord said, creates hassle and confusion; and it will make it much more competitive.
At the heart of the issue is an irony that does not happen in many other sectors, such as banking. If you force customers who wish to switch to contact their original supplier, you often get problems and disincentives built in, because it is not in the best interests of the supplier who is losing the customer to ensure that that egress is smooth and uncontested. That inevitably means that consumers get a raw deal, possibly do not get good price comparisons and have a lot more hassle than they otherwise would. I am happy to support the amendment.