Public Bodies (Abolition of the National Consumer Council and Transfer of the Office of Fair Trading’s Functions in relation to Estate Agents etc) Order 2014

Viscount Younger of Leckie Excerpts

Tuesday 11th March 2014 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That the draft order laid before the House on 5 December 2013 be approved.

Relevant documents: 17th Report from the Joint Committee on Statutory Instruments, 26th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 24 February.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

My Lords, this order delivers better, more effective consumer advocacy and more joined-up supervision of the estate agency regime. It marks the final step in the Government’s three-year programme of consumer landscape improvements, and its merits were debated at some length in Committee on 24 February. I will now once more set out for your Lordships why these changes are sensible, necessary and in the very best interests of the consumer.

Since 2011 we have streamlined and brought coherence to a landscape that was previously confusing and duplicative, and therefore inefficient. We have made it easier for consumers to understand where they need to go to get help and have given enforcers, advocates, and advice providers the tools that they need to do their new jobs. On 24 February the noble Lord, Lord Whitty, accused the Government of making these changes solely to save money or abolish quangos. This is simply not true. We are driven by a desire to improve the offer for the consumer. That is why we have created a landscape in which it is much clearer who is responsible for what, and in which there is much better co-ordination between consumer bodies and enforcers. This is markedly better than the previous arrangements because previously the consumer could have tried to phone lots of different organisations—their local council, a regional trading standards team, their nearby Citizens Advice bureau or the Office of Fair Trading—but now they need only ring one phone number, the single Citizens Advice Consumer Service helpline, to raise a concern, whether it is about their rights, a problem about a good purchased or a service performed or, if unsure, how best to take forward a complaint.

We have established a more strategic approach to consumer enforcement, education and empowerment through the creation of the Consumer Protection Partnership. Resources are now focused where they are most needed and can have most impact because key partners within the landscape now collaborate to identify the most pressing risks to consumers and work together to eliminate this harm. We are already seeing the success from this approach. By working together to raise awareness of used-car scams during National Consumer Week last year, for example, members of the CPP reached significantly more consumers than if each had worked in isolation. So that is a good reason for change.

We have also acted to close a potential enforcement gap by establishing the National Trading Standards Board and Trading Standards Scotland. We are ensuring that complex criminal activity can be more effectively tackled by trading standards because these bodies co-ordinate and prioritise national and cross-local-authority-boundary enforcement.

I turn to the specifics of this order, which has three distinct purposes: to abolish the National Consumer Council and transfer its relevant functions to Citizens Advice, Citizens Advice Scotland and the General Consumer Council for Northern Ireland; to transfer the Office of Fair Trading’s estate agency functions to the Commissioners of Her Majesty’s Revenue and Customs and Powys Trading Standards; and to transfer residual OFT functions relating to its former consumer advice scheme to Citizens Advice and Citizens Advice Scotland. The scheme itself was transferred to the Citizens Advice service on 1 April 2012.

One or two noble Lords have already expressed sadness at the abolition of the National Consumer Council. As I said on 24 February, I personally recognise the great contribution that that body has made to consumer issues over many years and the fact that a number of your Lordships have played no small part in contributing to that, including the noble Lord, Lord Whitty, the noble Baroness, Lady Hayter, and my noble friend Lady Oppenheim-Barnes. However, no organisation is above change and improvement, and I firmly believe that the NCC’s strong track record will be enhanced when it joins the Citizens Advice service as a result of this order.

Citizens Advice will be established as the publicly funded advocate for consumers, bringing together its existing wealth of knowledge of the problems faced by everyday consumers and Consumer Focus’s technical knowledge on the regulated gas, electricity and postal services industries. This change will create an even stronger voice for consumers, challenging public policy-making more effectively. This will mean better consumer outcomes because the issues that they are complaining about, such as confusing energy contracts, misleading prices and aggressive sales practices, will now directly influence consumer protection policy.

The transfer of the Consumer Futures function is a testament to this Government’s confidence in the major role that Citizens Advice plays in our civil society. We firmly believe, contrary to some claims in the other place, that the leadership of Citizens Advice is best placed to deliver the Consumer Futures functions alongside its bureaux and helpline services. In 2012-13 the Citizens Advice consumer helpline dealt with almost 837,000 new cases, while 91% of consumers reported that they would use the service again and 60% said that they could not have resolved the problem without the help and advice that they received. So there is evidence that change both has been necessary and is working.

Last week the noble Lord, Lord Whitty, expressed concern about funding for Citizens Advice, implying that it would have insufficient resources to deliver these new functions. I can confirm that Citizens Advice will of course continue to receive the same amount of ring-fenced funding, from an industry levy, to allow it to enhance the delivery of this important work.

These changes will also create a stronger link between national enforcement of the Estate Agents Act 1979 and local intelligence from the trading standards community by appointing a lead enforcement authority to carry out the work on behalf of all trading standards authorities. This will be overseen by the NTSB, ensuring a strong connection between local enforcement trends and national cases.

This lead authority model has been extremely effective in delivering other trading standards services. For example, fraud worth more than £145 million has been tackled by the Scambusters and the Illegal Money Lending Team in the past 18 months. The Illegal Money Lending Team is a trading standards unit based in Birmingham City Council, but it provides an England-wide service and has received plaudits for its successes. The funds for policing the UK estate agency market will be transferred from the OFT to Powys County Council via the NTSB’s enforcement grant, and ring-fenced to ensure that it is used for the purpose intended.

When the order was debated in the other place, as well as in the previous debate in the Lords on 24 February, there was some concern about the process for appealing against warning and prohibition orders issued by Powys County Council. I confirm that the Government are not proposing any changes to the estate agents appeal process under the Estate Agents Act 1979 through this order. An appeal can be made to the First-tier Tribunal (Estate Agents), which forms part of the General Regulatory Chamber of the First-tier Tribunal. This is the same appeals process as applies to dozens of areas of civil law. I am pleased to report that Powys County Council has written to the noble Baroness, Lady Hayter, to clarify this point. I hope that consequently the noble Baroness is reassured on this issue.

Questions have also been asked, both here and in the other place, about whether Powys County Council has the capability to undertake its new lead enforcement role. When the decision was made to transfer the OFT’s powers to a single trading standards authority, an open competition was run to select the local authority best placed to discharge the functions. All England and Wales local authorities were invited to bid for the work. Six bids were submitted, all of which were scrutinised by a panel that was chaired by the noble Lord, Lord Harris, and involved senior representatives from trading standards. This panel judged Powys to be the local authority best placed to provide the function and I have every confidence in the ability of its trading standards officers to carry out the work effectively.

On 24 February the noble Baroness, Lady Hayter, also expressed concern about accountability for and monitoring of these functions within our new consumer landscape. Citizens Advice and Citizens Advice Scotland both have well established grant funding relationships with my department and are already fully accountable for the use of public and levy funding through conditions placed in their annual grant letter.

Powys County Council will also be accountable to my department via the annual grant letter process. Powys will report to the NTSB as the co-ordinator of trading standards and the NTSB will be accountable to BIS, my department, for delivery of that work. Accountability for the functions under the money-laundering regulations is discharged through HMRC cost controls. I hope that noble Lords will agree that these arrangements are clear and robust.

Another issue raised on 24 February by the noble Lord, Lord Harris, and the noble Baroness, Lady Hayter, concerned the approval processes for estate agent and letting agent redress schemes. As noble Lords will no doubt be aware, the Department for Communities and Local Government is responsible for introducing redress schemes for the letting and property management sector.

The procedure for approving redress schemes in both the estate agent and letting agent sectors are outside the scope of this public bodies order, which deals only with the transfer of responsibility for approving the estate agents’ scheme from the OFT to Powys County Council. However, I can confirm that officials from BIS and the OFT have been in contact with their colleagues in DCLG to help them take account of the lessons learnt from regulating estate agents when designing the new letting and property management redress scheme. Although the two sectors may have many different characteristics, the process for mandating letting and property management agents will mirror that for estate agents.

This order also creates efficiencies by transferring responsibility for oversight of estate agents’ compliance with the money-laundering regulations to HMRC. This capitalises on HMRC’s expertise in supervising other sectors for the purpose of money laundering and creates opportunities to exploit synergies to uncover other forms of non-compliance, which will give the taxpayer extra value for money. My understanding is that the Opposition welcome this change; indeed, at the debate on 24 February the noble Baroness, Lady Hayter, said herself at column GC 301, “this bit is brilliant”.

Section 8(1) of the Public Bodies Act provides that Ministers may make an order only where they consider that it serves the purpose of improving the exercise of public functions. Such orders must have regard to efficiency, effectiveness, economy and securing appropriate accountability to Ministers. The changes I am proposing meet all these criteria. I remind your Lordships that the Secondary Legislation Scrutiny Committee supported our view that we have thoroughly met all the relevant requirements. Indeed, the committee was satisfied enough to invoke the 40-day, rather than 60-day, scrutiny process.

In conclusion, the changes made by this order complete the Government’s programme of improvement to the consumer landscape. In abolishing the National Consumer Council and transferring relevant functions to Citizens Advice, and transferring the OFT’s estate agency functions to HMRC and Powys County Council, this order puts the finishing touches to a landscape that will work more efficiently and effectively for the public.

I commend the order to the House.

Amendment to the Motion

Moved by

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The Minister has talked about improving the offer to consumers, but this measure is not doing that—this is transferring the offer to consumers and administering it in a different way. There is clearly work to be done both on the legislative framework about the interaction with letting agents and in terms of the resources that can be made available for this function, if we are genuinely to improve the offer to consumers.

[Viscount Younger of Leckie]

My Lords, this has been an interesting debate, and I thank all noble Lords for their contributions. Just before I go into the detail of the debate, I want to cover a couple of points. First, the noble Lord, Lord Harris, asked recently about the review of the Estate Agents Act. At present, we have no plans to review the Act. However, my colleague in the other place, Jenny Willott, has written to ask the ombudsman to review the issue of double-charging, which I agree is a worrying trend.

Secondly, I thank my noble friend Lady Oppenheim-Barnes for her general support for what we are doing in the Consumer Rights Bill. I very much welcome her support for the Government’s measures to modernise consumer law, which will make a major difference on behalf of consumers and has been widely supported.

I now return to this particular order. The Government believe that the changes introduced by the order will deliver more effective consumer advocacy and more joined-up supervision of the estate agency regime. Noble Lords have raised a number of points and I will seek to address these in a few moments.

The noble Baroness, Lady Hayter, stated that the measures that we are proposing lack coherence and fail to provide a single voice to protect consumers. I challenge that assertion. The consumer journey will not change significantly under the new arrangements. We are simply joining up the policy-making and regulatory oversight expertise of Consumer Futures with the existing consumer complaint handling abilities of Citizens Advice services. The changes do not mean additional burdens for local bureaux, as information on cases that they deal with is already collated centrally to inform Citizens Advice campaigns and reports. As a result of these changes, anyone needing impartial help or advice on a consumer issue will be able to phone the national helpline, contact their local bureau or use the interactive help on the Citizens Advice web pages.

The noble Baroness, Lady Hayter, and the noble Lord, Lord Whitty, suggested that we are simply abolishing quangos. Again, I challenge that assertion, as I did at the beginning of the debate. This is not simply about making a reduction in public bodies. Bringing together the in-depth knowledge of the regulated energy and postal service sectors with the wealth of intelligence on consumer problems available to Citizens Advice will bring coherence to public policy-making. For the first time, the consumer advocate will have detailed knowledge and understanding of the challenges facing real consumers across the country when campaigning to influence new regulation and policy development.

During the debate in Committee last week, the noble Lord, Lord Whitty, bemoaned the fact that a number of consumer bodies remained outside the scope of these changes. I reiterate that this is not about rearranging the deck-chairs for the sake of it. This is about achieving real benefits for society, by enabling consumer advocates to effectively influence energy policy, transport policy, telecommunications policy, financial policy and general consumer matters. Citizens Advice will collaborate with consumer representatives in the other regulated sectors to ensure that best practice is shared and that regulatory developments in the other sectors reflect insights from the experiences of people on the street. Trading standards officers already take enforcement action against local estate agents. Changes brought about by this order support the flow of information from local to national enforcement, bringing further coherence to enforcement in this sector.

The noble Baroness, Lady Hayter, implied criticism of the Government for failing to harmonise redress for estate agents with redress for letting agents through this order. I will say more about this in a moment, but such harmonisation was not an objective of this order and the estate agent and letting agent sectors have very different characteristics.

When the Enterprise and Regulatory Reform Act was debated in Parliament, the noble Baroness proposed an amendment that called for letting agents to be regulated in the same way as estate agents, much as she described in her speech today. This amendment was rejected by the Government on the grounds that overregulation reduces supply, which in turn reduces choices for tenants and could lead to rent increases. However, the Government recognised the value of introducing a mandatory redress scheme, and this part of the noble Baroness’s amendment is now part of the Act.

The Government have taken a consistent approach. The process to establish and approve the new redress schemes for letting agents will mirror that for the existing estate agency schemes. This follows discussions between BIS and OFT officials, with colleagues in the DCLG, to help them take account of the lessons learnt from regulating the estate agency market; such points have been made by noble Lords in today’s debate. The Secretary of State for Communities and Local Government will be responsible for approval and oversight of redress schemes for letting agents, reflecting his department’s responsibility for this sector. Oversight of the estate agency schemes, and approval for any future schemes, will reside with Powys, reflecting the extensive role of trading standards in the broader regulation of this sector.

Before I address some of the questions raised, particularly those of the noble Baroness, Lady Hayter, I will say that it is very good to have an endorsement of Powys by the noble Lord, Lord Berkeley. It was also particularly helpful to have an explanation of the changes and of the selection of Powys by the noble Lord, Lord Harris.

The noble Baroness, Lady Hayter, raised the issue of the line of accountability for Powys County Council and stated that it was convoluted and unclear. This is simply not true. Ultimately, Powys County Council will be accountable to BIS. Powys will report to the NTSB in its role as co-ordinator, and the NTSB will be accountable to BIS for the performance of its enforcement teams and projects, including estate agency work. For the avoidance of doubt, Powys-elected representatives will have no part in running the new estate agency functions—a point raised notably outside this House.

The noble Baroness raised the issue of the role of Anglesey and stated that the Government have still not made clear what the role of Anglesey is. Both the Consumer Affairs Minister, the Member for Cardiff Central, and I have made it clear that it is Powys County Council that will take on sole responsibility for delivering these estate agent functions. It is true that the original bid submitted by Powys County Council proposed that some of the work be carried out in partnership with Anglesey. However, during the development of the transition bid, as circumstances changed, a decision was taken to deliver all the necessary functions from within Powys County Council.

To avoid any potential conflicts of interest between its statutory responsibilities as the lead enforcement authority and local enforcement cases, Powys County Council has decided to second an official from Anglesey County Council to manage matters that relate to estate agents which operate within Powys County Council’s area. This officer will also investigate national cases under the Estate Agents Act, but will act under the authority of Powys County Council. The OFT currently operates a similar Chinese wall between its enforcement and investigative activities. If it is some reassurance to the noble Baroness, we will show the paperwork associated with Powys’s bid in due course, as promised by my colleague in the other place, Jenny Willott, in her letter to Stella Creasy today.

The noble Baroness also raised the issue of the delay in providing a response to the request from Stella Creasy on the FOI request for the paperwork on the Powys bid. I will clarify that her letter was received on Thursday night, requesting a significant amount of additional information. We issued a response to all the issues that she raised earlier today. We will provide the paperwork requested in accordance with the Freedom of Information Act 2000.

The noble Lord, Lord Borrie, asked why the estate agent powers passed to Powys. Currently, both trading standards and the OFT possess enforcement powers under the Estate Agents Act 1979. Transferring the OFT’s powers to trading standards will simplify the landscape by giving sole responsibility to trading standards. This is very much in line with the Government’s intention that trading standards be responsible for the co-ordination of national consumer enforcement. Under the oversight of the National Trading Standards Board, a lead local authority will utilise the network of national, regional and local intelligence provided by trading standards services to carry out this function. As I have said, there is a previous precedent for a local authority to discharge functions on behalf of a nation, as alluded to by the noble Lord, Lord Harris. For example, the illegal money lending teams for England, Scotland and Wales of the NTSB and Trading Standards Scotland are hosted by single local authorities.

The National Trading Standards Board ran a tender exercise in the summer of 2013, as the noble Lord, Lord Harris, has said, to appoint a lead enforcement authority to host the National Trading Standards Estate Agency Team. Each bidder was required to demonstrate how it would satisfy a number of criteria. As has been said, six applications were received in total, and these were reviewed by a panel of senior trading standards officers, supported by officials from BIS, the NTSB and the OFT. Each bidder was required to demonstrate how they would discharge the functions under the 1979 Act, and through careful analysis of bids, the panel was able to assess that Powys County Council was the authority best placed to provide the most efficient and effective management of the function. I hope that this extra information, on top of what I said earlier, gives some further reassurance to this House.

The noble Baroness, Lady Hayter, asked very clearly why Powys was not appraising letting schemes. I will reiterate that the lettings and property management work redress scheme under the Enterprise and Regulatory Reform Act 2013 is new, and only concerned with mandatory redress, as the DCLG has responsibility for letting and property management agents within government. It was decided that it would be best placed to manage the relatively straightforward redress scheme appraisal process. There is a distinct difference there.

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[Baroness Oppenheim-Barnes]

My noble friend will remember that in Committee during consideration of the then Enterprise and Regulatory Reform Bill I cited the amount of money that I made available to Citizens Advice in 1979-80 because of a small increase in its duties. It was £3 million then, which, in terms of what is being given now, causes me great concern. All members of citizens advice bureaux are not necessarily well versed in consumer affairs—they have other qualifications. If situations arise in which they do not know what to advise, who are they going to ask to tell them?

[Viscount Younger of Leckie]

I should like to write to my noble friend to clarify that question and give her more detail about the transfer. I hope that I will be able to give her some figures and will copy in other noble Lords to provide further details. I hope that that gives my noble friend some reassurance.

The noble Baroness, Lady Hayter, suggested that the provisions in the order do not provide—

[Lord Whitty]

Before we leave the issue of the transfer of money and personnel, is the noble Viscount saying that he rejects my view that less than half the number of posts in Consumer Focus three years ago will actually reappear in Citizens Advice, and that the non-post, non-energy side has been cut significantly—almost by half—in that period? That is a considerably larger reduction than the general cut in public expenditure to which he referred.

[Viscount Younger of Leckie]

I will be writing to my noble friend Lady Oppenheim-Barnes to clarify the position on the transfer, and the letter will be sent to the noble Lord. That should directly address the issue of how many staff are likely to be transferring.

[Lord Whitty]

I accept what the noble Viscount said regarding transfer, but I was referring to the point about the transition over the past three years when compared with what the NCC was previously doing.

[Viscount Younger of Leckie]

I will write to the noble Lord. The noble Baroness, Lady Hayter, suggests that the provisions in the order do not provide adequate parliamentary or ministerial accountability. However, I dispute that, as the noble Baroness will know. In making an order under the Public Bodies Act, a Minister must have regard to a number of tests, including the requirement to secure appropriate accountability to Ministers. The Secondary Legislation Scrutiny Committee considers compliance with all these tests. I remind the noble Baroness that in the case of this order the committee concluded that it was content to apply the 40-day affirmative procedure rather than the more stringent 60-day process. However, I will again set out the measures that we have put in place to ensure clear lines of accountability, and I will do that in a separate letter on grounds of time.

I conclude by addressing the comments made by the noble Baroness, Lady Hayter, and the noble Lord, Lord Whitty, at the beginning concerning quango-cutting. On the one hand, we are being accused of having too many bodies; on the other hand, we are accused of being forced by the Cabinet Office to cull quangos. We think that our redesign of the consumer landscape strikes the right balance, including representation across all parts of the UK. The changes brought about by this order will deliver more effective consumer advocacy and more joined-up supervision of the estate agency regime.

[Baroness Hayter of Kentish Town]

First, I thank the Minister for doing as good a job as he could with the material at hand. I think that we know that he is batting on a sticky wicket but he did his best. I also thank the noble Baroness, Lady Oppenheim-Barnes, the noble Lord, Lord Berkeley, and my noble friends Lord Borrie, Lord Whitty and Lord Harris for their contributions to my regret Motion. I particularly thank the noble Baroness, Lady Oppenheim-Barnes. She called herself the “great-grandmother”. I think I would have to say “godmother”, because it sprinkles a bit of gold dust whence it goes. Consumers have an awful lot to thank her for.

I also express thanks to my noble friend Lord Stevenson, who, as we have been going along, has managed to find for me the debates that the noble Baroness referred to concerning her attempts to halt the merger. I am afraid that my memory is perhaps not as acute as it should be but we have looked quite carefully at them and it looks as though we were trying—maybe we took the wrong call—to improve what was being proposed. With our Amendment 24ZB, which I have just looked up, and another amendment, we were trying to get the CMA to take on and strengthen the consumer protection, enforcement and guidance role. We noted the comment that the noble Baroness made at that time about the possible lack of independence brought about by bringing the two organisations together. That is slightly different from our amendment but the call that we took was to try to improve what we thought was going to happen. However, looking through the speeches, it appears that we were on the same page for quite a lot of the time.

I shall try to be brief because it is now time to draw this to a close. There are questions remaining. We get a letter saying that Anglesey has no role; now we find, if I have understood it correctly, that someone is going to be put into Powys to sit there and do the job, but that person will presumably be answerable to employers in Anglesey. We need some clarity on this. We are told that elected councillors will have no role but it is their staff to whom they have a duty of care and other employment responsibilities. It would be extraordinary if elected councillors had no say on what was going on in their premises. Nor have we had a serious answer to why we are not using the same mechanism to approve redress schemes. I did not say “the same redress schemes”; we were talking about the same mechanism to approve them.

Contrary to what the noble Viscount said, I think that this is about getting rid of quangos. This happened under the Public Bodies Act and that was referred to in the coalition agreement. My noble friend Lord Harris of Haringey is right: this is not about improving the consumer offer, much as I would have liked it to be. I remain doubtful about whether delivering national functions via local trading standards is the most effective way of promoting consumer interests.

I also still have some concerns about the independence of Citizens Advice. I gather that there are still some discussions about whether it is going to be a public body, with all that that means with regard to procurement and the organisation’s way of working. Some clarification on that is necessary. I have no doubt about the role that Citizens Advice has in helping consumers who have detriment today. We have never questioned that. Our concern is about whether influencing today’s providers, regulators, the Government and Europe can be done by the same body which, every day, answers phone calls and e-mails and has visits from hard-pressed consumers.

I should say that I am known now as Lady Hayter of Kentish Town. I was, until my last relative died there, going to be Lady Hayter of Ystradgynlais. However, I thought that it would be a bit too much of a challenge to Hansard writers—hence Kentish Town. I also lived in Bodedern in Anglesey. Therefore, I am aware of the strength of those bodies but whether they are the rights ones to take this on, I remain doubtful.

Having said all that, we can only wish all these new organisations well for the sake of consumers, for the sake of the people whom the noble Baroness has looked after for so many years and for the sake of people whom my noble friends Lord Borrie, Lord Harris and Lord Whitty have done so much for. We can only wish them well. I know that what they need at the moment is speed. For those reasons, I beg leave to withdraw my amendment.