Public Bodies (The Office of Fair Trading Transfer of Consumer Advice Scheme Function and Modification of Enforcement Functions) Order 2013

Lord Whitty Excerpts

Tuesday 12th March 2013 Grand Committee

[Lord Whitty]

My Lords, I thank the Minister for setting out this order in some detail. It is, of course, as he said, part of a wider strategy towards the transformation of the consumer landscape. Attached to the explanatory document is a paper which set out nearly two years ago the way in which the Government approached that matter. One or two things have changed in the interim, and there are one or two things with which I agree and one or two things with which I disagree. However, this is only part of a bigger jigsaw. As the Minister said, the order deals with the transfer of Consumer Direct to Citizens Advice and the OFT enforcement functions to the Trading Standards services of local authorities.

In principle, I strongly support the first of these. We of course referred to it in the process of the Enterprise and Regulatory Reform Bill, so there is some overlap in the discussions we have already had here and in the Chamber. Some of it—although I suspect the Minister is not allowed to say so—may come post 8 May in a new consumer Bill, which I know his department is considering either for the next Session or the Session after. So we cannot expect everything to be resolved by this order. Nevertheless, there are some issues which I think should have been, but are not yet, resolved.

Given the last encounter between myself and the noble Viscount, I should thank him for at least trying to follow the procedure under the Public Bodies Bill on this order, as distinct from the Agricultural Wages Bill. The order and the explanatory document answer a lot of questions. However, as he has recognised, the Secondary Legislation Scrutiny Committee has not been entirely impressed by the way he or his colleagues have dealt with the issue of economy and have therefore recommended the enhanced affirmative procedure. I shall come back to this aspect because it largely relates to the transfer of enforcement powers and I want to deal with the transfer of the consumer advice powers first.

As I say, I welcome the transfer to Citizens Advice, particularly given the general direction of the Government’s intent on the consumer landscape. Even without that, I would have regarded it as sensible to transfer Consumer Direct to Citizens Advice. However, I have a few questions. First, Article 2(3) states boldly that the OFT’s role in this respect is abolished, except to a limited degree in Northern Ireland, which I shall come back to. Does that mean that in this area the OFT has no oversight role? There is no quality assessment of how well Citizens Advice performs, and it will continue to be partly a directly publicly funded function and partly a function based on mandatory levies on various industries. I assume those levies are simply the levies that are currently raised for Consumer Direct purposes rather than the wider levies that go via Consumer Focus.

It seems somewhat odd that the oversight role in this area is abolished completely. My noble friend Lord Borrie was complaining that the oversight role in relation to enforcement is greatly diminished, but at least there is a role there. In this area, it seems that there is no potential intervention by a statutory body. This is important because Citizens Advice, for all its great wealth of experience and expertise and the great respect in which it is held in the consumer movement and more widely, is a non-statutory body, and we are giving what was previously an administrative body supported by legislative powers responsibility for activity that was previously run by a statutory body. That presents a number of problems. In real life, they are probably resolvable, but it is odd to resolve them by abolishing the body that has ultimate, fail-safe oversight and by abolishing the new body’s responsibilities in that respect so that the CMA will have no responsibility in the area of consumer advice, as I read the effects of this order.

It is also interesting that the order does not mention consumer education, which is also being transferred to Citizens Advice. The OFT conducts quite a significant amount of activity on consumer education, and that does not seem to be explicitly covered here. Can the Minister assure me that it is subsumed in this? From the wording, it does not look as though it is, although I understand that the transfer has already been made.

The lack of a residual oversight role is important, but it also leaves Citizens Advice somewhat exposed. Articles 7 and 8 of the order and paragraph 4.6 of the explanatory document refer to Citizens Advice and Citizens Advice Scotland now being subject to the Freedom of Information Act. I can see why that has happened, but it makes Citizens Advice somewhat vulnerable. If it is subject to the Freedom of Information Act, there is the question of other powers in this area that were the responsibility of Consumer Focus under the Consumers, Estate Agents and Redress Act 2006, in particular Section 24 of that Act, based on previous powers that existed for Energywatch, which provided that Consumer Focus had pretty strong statutory powers to demand information from any company providing any good or service. Previously that power applied only to energy companies and to the Royal Mail, but it was generalised in that Act. Those powers were very effective, and were rarely explicitly used because the threat of doing so usually got you the information that you wanted.

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[Viscount Younger of Leckie]

I hope I can answer the noble Lord’s question. Trading standards play a critical role in protecting consumers and business in their local authority areas, in particular from rogue traders, but the responsibility was split between local authority trading standards services and the OFT creating an enforcement gap. While BIS provided some support for regional and national enforcement schemes, the NTSB has been formed specifically to tackle cross-boundary and national threats.

The noble Lord, Lord Borrie, asked whether members of the local authority are members of the NTSB, which goes a little further in answering his original question. The answer is no. Heads of local authority trading standards comprise the NTSB. There is a political oversight group made up of representatives of local government and the LGA which connects local decision-making with national enforcement.

The noble Lord, Lord Borrie, was concerned that the OFT will not oversee enforcement supervision. In this case, the OFT, Trading Standards and other enforcers will share a power to enforce. This will ensure that while the OFT will be able to continue to use its expertise in this area, other enforcers, including Trading Standards, will take up cases that more appropriately fall to them. Trading Standards will act as the lead enforcers of this legislation and will retain a duty to enforce the regulations, except in the case of the Unfair Terms in Consumer Contracts Regulations 1999. That is complex, but I hope it explains that slightly more clearly.

The noble Lord, Lord Whitty, asked how Citizens Advice will be accountable for Consumer Direct and consumer education. The work of the Citizens Advice service on Consumer Direct will be accountable to the Consumer Minister through grant arrangements set up by the Department for Business, Innovation and Skills. These grant arrangements will set out challenging performance targets which will be closely monitored by the department. I can reassure the noble Lord, Lord Whitty, that Citizens Advice will take on the role of consumer education.

The noble Lord, Lord Whitty, also asked whether Citizens Advice could be subject to a judicial review. There is a low risk that Citizens Advice may be subject to a judicial review in relation to the function transferred. However, it is more likely that other legal claims will be brought, such as negligence. The Citizens Advice services have taken their own advice on this risk and have given their consent to the transfer of the consumer advice functions on that basis.

The noble Lord, Lord Whitty, wanted to clarify who SMEs will receive advice from. Most business-facing advice and education will transfer from the OFT to the Trading Standards Institute from 1 April 2014, but businesses seeking advice as consumers will be able to access Consumer Direct as before.

The noble Lord, Lord Whitty, also asked for clarification on whether the NTSB will quality control Trading Standards. The NTSB itself, and the teams that it sponsors, are subject to tight funding terms and conditions to ensure that they deliver against business priorities. Local trading standards are subject to local government procedures. The noble Lord also raised concerns about cuts to local trading standards services. The provision of local trading standards services is a matter for individual local authorities, and even in the current climate, they will continue to take local and pan-local cases.

The intention is that there will be specific funding for enforcement against national threats separate from the budget for local issues. There are plenty of examples of cases where local officers have dealt with complex cases successfully. The NTSB will ensure that resources are allocated to large cases as and when appropriate. In addition, local officers often have a culture of working with business to resolve problems. I believe that trading standards services have already demonstrated their ability and professionalism over many years, and I hope that the noble Lord would agree with that.

[Lord Whitty]

Can the Minister say how much of what had been the OFT budget for dealing with these national, cross-boundary and complex issues will be fed down to the NTSB and trading standards services?