Consumer Rights Bill

Baroness Neville-Rolfe Excerpts

Monday 13th October 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I join the noble Baroness, Lady Hayter, in thanking my noble friend Lady Wilcox and my predecessor, my noble friend Lord Younger, who so elegantly got us to this point. I am also very touched by the welcome you have given me. I look forward to working with your Lordships on this very important Bill, the first on which I represent the Government. I was very sorry to miss Second Reading, but I have carefully studied the Hansard. I am honoured to be discussing a Bill that represents a seminal modernisation and simplification of consumer law. Simple rights simply expressed are, to me, very important.

I agree that it is vital that we support the smallest businesses and help them to grow. Small businesses are the lifeblood of our economy, making up 99% of private businesses and employing 14 million people. Small businesses are responsible for nearly half the job creation in the UK, employing more than 500,000 more people in 2013 than in 2011. That is why the Government are doing more than ever before for small businesses.

It has never been a better time to start, grow and operate a small business in the UK. To give you just a few examples, we launched a £1.1 billion package of business rates measures, with extra relief announced for small businesses through the extended doubling of the small business rate. We set up a £30 million growth vouchers programme, which will see 20,000 small businesses receive up to £2,000 to help them access specialist support on hiring, financial management and marketing, which, as I know from business, are key areas. Since April 2014, every business and charity is now entitled to a £2,000 employment allowance to reduce their employer national insurance contributions bill each year. Over 90% of this allowance will go to small business.

Perhaps even more importantly, in December 2013 the Government published Small Business: GREAT Ambition, setting out our commitment to making it easier for small businesses to establish and grow in the UK. As my noble friend Lady Wilcox said, we have now introduced the Small Business, Enterprise and Employment Bill in the other place. That Bill will help to reduce the financial and regulatory barriers to starting and growing businesses. I very much look forward to debating that Bill with your Lordships.

However, this Bill is about consumers. Its background is that consumer rights are found in a variety of places, often set out in inaccessible language. We know that consumers and businesses often do not know their rights. That is the motivation to have key consumer rights set out in this one place, where they are easy to find and to access. As soon as we start including rights for other parties in this Bill, that core purpose is diluted and we risk losing the clarity we are aiming for, which I believe is valuable to businesses and consumers. In passing, I should reassure the noble Baroness, Lady Hayter, that there are protections in law for businesses dealing with other businesses. For example, the Sale of Goods Act 1979 gives them a right to reject faulty goods.

We consulted on our proposed definition of “consumer” in 2008 and 2012. In both cases, we received overwhelming support for what we have now in this Bill—that is, clear support from the business community for not defining micro-businesses as “consumers”. The noble Baroness, Lady Hayter, suggested that small businesses do not have time to respond to consultations, but that is a reason to ensure that we do engage with them via their trade bodies, including the Federation of Small Businesses, with which I met only last week; it is not a reason to legislate on the assumption that we are doing what is right for them.

The Federation of Small Businesses recently commissioned and published research on this issue. The FSB did not recommend, as I think has been suggested, treating smaller businesses as consumers for this Bill but did make several suggestions for the future. My colleague Jenny Willott wrote to Parliament giving our detailed response to that report. Within that, we committed to considering the treatment of smaller businesses in developing future consumer legislation, just as we did in 2008 and 2012 for this Bill.

The noble Baroness, Lady Hayter, talked about taking an enabling power. We have already considered covering small businesses in 2008 and 2012, and taking a power would not be appropriate because this change could impact 97% of all businesses. It should not be left to secondary legislation.

This Government are also committed to closely monitoring and ultimately reducing burdens on business. That means that, for each and every proposal, we must be sure that we are not directly or through unintended consequences overburdening business. This amendment does not meet that test.

We simply do not have clear evidence of what the effect of treating small or micro-businesses as consumers would be. As a business person, my concern would be that, if a smaller business can, for example, successfully challenge terms as unfair, does it mean that a larger business will simply stop dealing with them? To give another example, how do we know that the benefits outweigh the costs? If smaller businesses were classified as consumers, there would be benefits to a small business as a buyer, but also a cost to them when they sell to small businesses. We must be wary of giving with one hand and taking with the other.

We do not know how larger businesses would react, and we do not know whether the costs outweigh the benefits, but we would need to know. We would need to change the legal framework for over 95% of businesses—that is, 4.7 million businesses—without a full and complete understanding of the impacts. This Government are committed to helping small businesses to grow. Businesses, including small and micro-businesses, are not of course unprotected despite not being defined as “consumers” for this Bill. Provisions under the Sale of Goods Act and the Supply of Goods and Services Act apply to them now and will continue to apply.

In conclusion, this Government are doing more than ever to help small businesses to grow, and there is a great deal of evidence that this is working. However, this Bill is about consumers. For the reasons that I have explained, I ask that the amendment be withdrawn.

[Baroness Hayter of Kentish Town]

I thank the noble Baroness, Lady Wilcox, and my noble friend Lady Crawley for contributing to this debate. I did not know that I was meant to answer questions but, of course, I was not in the previous Labour Government. Had I been, I could give noble Lords a long list of things that they perhaps should have done—please do not report me to the boss for that.

I thank the Minister. She has not actually answered the question of whether this would be wrong. She said, “We don’t know; there is not enough information; we haven’t got research”. Actually, however, she had no good answer. If two of us go to John Lewis and buy a kettle, one of us for a charity that we run which employs all of one person and three volunteers, and the other just for themselves, it does not help John Lewis for them to take their complaints in two different ways. John Lewis probably would not worry at all about there being the same form for both.

I was sorry that the Minister used the examples I had cited, the 2008 and 2012 consultations. Obviously, we can blame the 2008 consultation on the previous Government, but there is an issue in that this is about the big companies. We know that from responses to consultations. It is therefore important to remember that the Federation of Small Businesses has said that it supports this amendment. I would like to make that correction because the federation has asked me to do so, should the Minister refer to its research. It has said that, “This is not an accurate reflection of our conclusions. The report that we commissioned was to inform our policy”. So they were not actually the federation’s recommendations; they were recommendations made in an independent report. However, apparently where the report talks about “non core” area business such as purchasing energy supplies, there was a case for it being treated separately.

I would add only that all the help for small businesses is great, and I believe that on deregulation there is even more to come. But if the Federation of Small Businesses says that the best thing to help micro-businesses is this, it seems a little funny not to hear the federation on it.

I am grateful to the Minister for her comments and at this stage we will seek leave to withdraw the amendment, although I think that it is probably something to which we will want to return on Report.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

4: Clause 3, page 3, line 12, leave out “contract for which there is no consideration” and insert “gratuitous contract”

[Baroness Neville-Rolfe]

I am pleased to say that this Bill benefited from useful scrutiny in the other place. As part of that scrutiny, the Committee heard evidence from Professor Hector MacQueen of the Scottish Law Commission. In discussion with the Committee, Professor MacQueen recommended a change to the drafting to improve the references in the Bill to Scottish contracts. He described this change as important to ensure that a,

“jurisdiction-neutral picture is maintained”.—[Official Report, Commons, Consumer Rights Bill Committee, 11/2/14; col. 22.]

We received similar feedback during our discussions with stakeholders in Scotland. These amendments therefore address that issue. They rephrase Clauses 3(3)(e) and 48(3) so as not to use the term “consideration” to describe a Scottish contract, and therefore to reflect the fact that that term is not a Scots law concept.

Working with the Scottish Law Commission and in consultation with other stakeholders we therefore propose the wording in this amendment. This is a point of clarification after feedback in the other place; the policy and its effect remain the same. I therefore beg to move Amendment 4.

Amendment 4 agreed.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

In moving Amendment 9, I wish to speak also to Amendments 13 and 25 in this group, which all stand in my name and that of my noble friend Lord Stevenson of Balmacara.

Amendment 9 is central to the aim of the Bill as it states that the trader must be explicit about people’s statutory rights at the time of the purchase so that people know when they are buying something what they can do if something goes wrong and what their rights are. The Bill’s laudable aim of simplifying rights and making them useable will be achieved only if consumers understand what those rights are. The best time to explain them is when they are about to make a purchase; we should not wait until something goes wrong. For the vast majority of consumers nothing does go wrong, or we hope that is the case. We purchase goods where nothing goes wrong far more often than we do goods where something does go wrong, but it is at the moment of purchase that these rights should be explained. It is also part of the process of deciding whether to buy something. It is important to know what redress you have if you are worried about whether something is faulty or will work. I cannot be the only person who has been a bit mystified when standing by a till and reading a notice which says, “This does not affect your statutory rights”. Indeed, I am tempted to ask the Minister to explain that term, but I will save her blushes on this occasion.

BIS’s own consumer detriment survey showed that although the majority of people consider themselves to be confident and savvy there were still substantial gaps in their knowledge, so just asking consumers whether they are confident about knowing their rights is not good enough. For instance, more than two-thirds of them did not know that if a major appliance broke down 18 months after purchase, they could still have a right to have it repaired or replaced even if they did not purchase an extended warranty. Indeed, very few of us understand our rights and that will remain the case unless we all receive some very simple explanations, no matter how well the Bill is drafted. We agree with Citizens Advice that rights can be set out briefly and simply. It has produced wording on this issue which has been seen by BIS—for example, “Under the Consumer Rights Act, consumers have 30 days to return an item if it is faulty”, so we are not talking about complicated wording. Similar information on repairs or refunds could be given at point of purchase.

We know that the Government agree in principle with giving this clear information but have backed off including it in the Bill, arguing that that would reduce flexibility for the implementation group, which comprises retailer and consumer organisations. We know from gossip on the street that there is consensus in the group that action is needed to make sure that consumers are aware of their rights but no consensus on whether point-of-sale information should be mandatory. I hope that I am not giving away any secrets in saying that the business members, with support from trade associations, BIS and retail groups, argue that a voluntary approach would be the best way forward, whereas Citizens Advice, Which? and moneysavingexpert, which I think also sit on the group, remain unconvinced about that, as do we. There is no guarantee that traders will voluntarily display this type of information and, once a Bill is passed, attention and enthusiasm tend to fade. Some traders will go on displaying the information for a short period but that is not the same as it being displayed everywhere all the time.

It is true that at an earlier stage in the other place we were told that the implementation group would be looking at whether consumers would consider this sort of information better when something actually went wrong. If that is the case, I am sure that the Government will accept our Amendment 13 in this group, which I will get to shortly, which is about giving information at the time of a problem. However, our view is that information should be given both at the point of purchase, in the sense that it is part of the purchasing decision but it is also part of educating consumers, and later, should something go wrong.

Amendment 13 is about telling people their rights when they actually make a complaint. A key part of consumer rights is the availability of redress. The noble Baroness, Lady Wilcox, who is not in her place at the moment, started going through the six consumer principles, and of course the right to redress, as she knows very well—she probably wrote them—is one of them. The right to redress is having something put right, preferably by the service provider but, if not, having the issue settled by an ombudsman, perhaps with compensation. However, the consumer will not even start on that journey of complaint and seeking repair, replacement or refund unless they know they have that right to complain and when that right is there. Amendment 13 would ensure that the rights to redress was more widely understood and used by explaining, at the time when someone complained, what those rights were.

Although some of us have confessed to not being the savviest of shoppers, I hope we do not still fall for those offers. I do not know how savvy we are when we go back to a shop to complain, wanting either a replacement or a repair. What happens very often is that we are misinformed about what our rights are. There is a lot of evidence that traders themselves either do not understand the position or choose to misrepresent consumers’ statutory rights. Which? did a secret shopping exercise and contacted six major retailers, visiting them each 12 times. In nearly 80% of cases, a member of staff,

“stated or gave a clear impression that we”—

that is, the people doing the mystery shopping—

“didn’t have any rights against the retailer, or told us to speak to the manufacturer instead”.

Shoppers also get told that goods are out of warranty, that they need to go to the manufacturer or that there is simply nothing that can be done. The other thing that can happen is that traders refuse to give a refund even when they should, but offer a credit note to be used in the same shop. Clearly, that does not meet statutory rights. If the consumer is very persistent and goes to Citizens Advice, they may then know better and go back, but there is then still no guarantee that the member of staff they talk to will know what their rights are. Under Amendment 13, both staff and consumers would have easy access to information about the buyer’s rights and therefore would be able to have a better conversation.

I know that the Government were hoping that the implementation group could come up with a way forward but, given that we think that has not happened, it would be useful to take advantage of this amendment and put it into the Bill. Even if the group did come up with recommendations we are unsure of what their legal force would be, so perhaps the Minister could also say whether any recommendations from the voluntary group would have any legal force. We have the opportunity here to set a requirement that such information will be provided. This does not need to be the exact wording—the group can do that—but if we fail to put it into the Bill at all, we risk undermining the Bill’s benefits. We know that good traders are going to do all this; it is the poor ones that we are after.

One further small area in this group that consumers also need more clarification on is free guarantees—guarantees provided free of charge by traders over and above statutory rights. We are talking here not of paid-for warranties but of free guarantees. Amendment 25 would require that any such guarantee provided by a trader sets out what the statutory rights are; otherwise, the purchaser has only the trader’s guarantee and is still not told what their statutory rights are. This approach has been very much supported by Martin Lewis of moneysavingexpert.com, who says that it is really important for consumers to know whether the trader’s guarantee is worth anything more than statutory rights. Also, if consumers are told what their statutory rights are, they might decide not to buy the extended warranty, because they may have more rights—particularly after this Bill—than they thought that they had. Without this amendment, they might get very confused when they have a trader’s guarantee to know whether there is still something left to them under their statutory rights.

What the Minister in the Commons said is important: that statutory rights always override any statements in a trader’s guarantee. Even if a trader’s guarantee does not meet something, the statutory rights always override it, but my guess is that not many consumers know that. Even in that position, they may have to take legal advice to find that out or to go to court, which is not the position we want them to be in.

We hope this small amendment will be accepted, because it will again be a way for consumers who have this extra guarantee to know exactly what their statutory rights are, which is an objective that the Government, as well as ourselves, would like to meet. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I should start by saying that it is extremely important to the Government that the implementation of the Bill should be done really well. Good implementation is a key feature of good regulation and our attention will not fade. That is why we set up an implementation group last year with representatives from business, consumer organisations and consumer law enforcers. I think we are agreed that we all need a better understanding of our rights. The group is helping us plan key aspects of implementation of the new law, including: the content, channels and timing of guidance; advice; and publicity. The group has been influential in devising our implementation strategy, which is summarised in the implementation plan that we recently published.

If this legislation is to be effective then it is hugely important that consumers should feel confident about exercising their statutory rights and that businesses should know and fulfil their statutory responsibilities. We certainly accept that this is not currently the case. This year’s consumer detriment survey and research by Citizens Advice and Which? show that consumers become discouraged from pursuing claims to a satisfactory settlement. Lack of knowledge about their rights and even misinformation by sales staff are factors in their giving up. That is why we asked the implementation group to consider carefully whether there should be a requirement for traders to provide information on consumer rights to all consumers at point of sale or when rights are enforced.

As your Lordships can imagine, the implementation group strongly supports the Government’s objective of making it easier for consumers to find out about their rights. We believe that traders have a very important role in this. Business and consumer organisation members of the group have therefore worked together to develop a high-level summary of consumer rights when consumers buy goods, services and digital content. The summary also signposts consumers to the Citizens Advice helpline and website for more detailed guidance on specific issues. We have begun testing this model wording with businesses and consumers to ensure that it is easily understood and we have had some very good feedback on the concept so far. We aim to make it available to businesses by April next year to use in their communications with their customers. I have a working draft, which is being canvassed widely, on my iPad. I do not think that I am allowed to show noble Lords my iPad on the Floor of the House.