Enterprise and Regulatory Reform Bill

Baroness Oppenheim-Barnes Excerpts

Wednesday 12th December 2012 Grand Committee

[Lord Whitty]

My Lords, this amendment puts the consumer interest at the centre of everything that we are doing. A number of organisations have, one way and another, had some changes proposed to them in the consumer field in recent years, since the advent of this Government, who call it the “consumer landscape”. They are changing the role of the OFT and slightly changing the role of the sector regulators; they have, somewhat to my distress, changed the role of Consumer Focus, the major consumer organisation, previously the National Consumer Council, of which I was chair and the noble Baroness, Lady Oppenheim-Barnes, was a distinguished chair at an early stage. They are not leaving a consumer voice in the same central way as was provided in the previous 37 years. Some of those functions will be done elsewhere, some will be inherited by different bodies and some will be in the public sector, but most will be in the third sector or somewhere in the ether.

That is not a satisfactory position. If the regulator and the industry are to deal with the consumer interest in the central way that the department continues to emphasise in all its publications—though its actions somewhat belie it—we have to be clear where the functions that used to exist now lie. In relation to this part of the Bill, the OFT already included a number of functions beyond the areas of market structure—in other words, beyond merger, monopoly and dominant position. It had general responsibilities to look after the consumer interest, consumer protection and duties and consumer law. Some of those duties are now to go out of the organisation; in fact, on the face of it, most of them are to go out of the organisation, and the new organisation will primarily be concerned with market structures. This could prove to be unsatisfactory. I appreciate that BIS is still issuing consultation papers, replies to consultation and new White Papers in the consumer area, but it would have been more appropriate if they had all been brought together in one Bill. Instead we have some of it in the Public Bodies Act, some of it in this Bill and some of it yet to come—so we do not get a very coherent position.

To be more specific, as the amendments are, the present duties of the OFT include responsibilities for general protection of consumers, including responsibilities for consumer education, information and advice. Section 6 of the Enterprise Act provides for information and advice and Section 8 for support for consumers in the market and the particular provisions in relation to consumer-facing codes of practice for different sectors. Those have been important roles for the OFT, and in addition it has developed other roles, such as the scam-busting role and other interventions in pursuit of consumer protection and acting against consumer detriment. Those roles, as far as I can see, are not to be part of the roles of the CMA.

Section 8 of the Enterprise Act is to be deleted entirely. Amendment 24F reverses that deletion, so that the OFT could continue to provide help to consumers in relation to their general protection and the codes of practice. Section 6 of the Enterprise Act, which deals with education, is still there. However, as I understand it, it will be devolved to Citizens Advice. Indeed, any of these powers can be devolved. However, whether or not the powers are devolved, the question is: which government organisation is responsible for ensuring that they are properly carried out and that consumer detriment is not increased but diminished as a result of the changes?

The amendments seek to deal with what I understand to be a situation that is not covered in the Bill. As I said, consumer education is now to be the responsibility of Citizens Advice. The codes are, vaguely, to be the responsibility of trading standards departments and a new body, the National Trading Standards Board, which is in the process of being established—however, it is not a statutory body or a body mentioned in statute—and another, rather shadowy, body to be established called the Strategic Intelligence, Prevention and Enforcement Partnership, which does not exactly trip off the tongue. Its acronym is SIPEP, which is a particularly apposite title.

It is to all these slightly shadowy bodies, based in part on trading standards and in part on the third sector organisations, that the powers which previously belonged to the OFT—and which were very important in establishing new benchmarks for the consumer interests—are to be devolved somewhere down the line. I am a great admirer of trading standards—indeed, I am a vice-president of the Trading Standards Institute—and have a great respect for it. However, it has for some time—not only under this Government, I am afraid—been deprived of resources and reduced in scope so that its ability to deal with major scams across the borders of local authorities is limited. Although the National Trading Standards Board may enhance that a little, it will not be able to do so without strong backing from the centre. However, that backing from the centre, which the OFT previously provided, is not in this Bill.

My amendments seek to provide a number of things. They seek to restore Section 8 and to ensure that these functions are robustly devolved—because these functions can be devolved; I am not necessarily objecting to that—and that it is made clear to Parliament that they are being devolved. Where they are devolved to public sector bodies such as trading standards departments at local authority level, or to third sector bodies such as Citizens Advice, Parliament should know and deliberately make those decisions.

It is also important that those decisions are reviewed and reversible, and these and later amendments provide for a review system. Much of this is new territory. Taking it away from the centre and pushing it down the line may be a dimension of localism, reducing the role of the state and increasing that of the third sector, but we need some means of judging whether it works or not. I therefore propose five-year reviews and an ability to reverse the devolution of responsibilities. However, we cannot reverse devolution if they are not referred back to either the Secretary of State to give the responsibilities to some other body or to the CMA. All this needs to be in the Bill.

If we do not do that, there is a real danger that we will dilute the achievements of the OFT. I know there have been criticisms—I have had criticisms—but the OFT has raised the standard of consumer protection in this country and is recognised by the consumer movement internationally and by other bodies as having done so. The danger is that the central regulator’s role will be diluted; that it will be differently effective in different parts of the country and in different sectors; and that the independent voice of the consumer will be less than it was previously. This all adds up to a serious diminution of the consumer influence on policy.

I hope we can ensure, even if we do not adopt my exact words, that the Bill makes clear where those responsibilities are going, how they are to be assessed and, if necessary, how they can be reversed and reallocated. I beg to move.

[Baroness Oppenheim-Barnes]

I would like to make clear at this point that I agree with every single word that the noble Lord said. I hope to have similar support from him when the time comes.

[Baroness Crawley]

My Lords, as president of the Trading Standards Institute—excuse my cold—I agree very much with my noble friend Lord Whitty that there is a need at this point for precision when it comes to the role and functions of the CMA and the transfer of functions from the OFT. I especially agree when it comes to the funding of the transfer of those functions. There is a lot of uncertainty around that at present. There is a good will and hope but we need some answers from the Minister at this point about both national and local authority funding—the latter is under unprecedented pressure—to ensure that this devolution process operates as best it can and strengthens rather than weakens the role of the consumer. We must have some answers as far as funding of the transfer of functions from the OFT is concerned.

As my noble friend Lord Whitty said, some of the roles of the OFT will go to the National Trading Standards Board. However, as he said, that does not have a statutory underpinning. As far as I can see, it is a new animal in the process of being created. The Minister would help us all if he gave us some idea of the accountability within the creation of the National Trading Standards Board. There is a great deal of work being done, as noble Lords can imagine, to ensure that consumers will continue to be protected to the highest standard. I have nothing but admiration for the people trying to make that work, as far as both trading standards offices and the National Trading Standards Board are concerned, the latter made up of senior trading standards officers working across borders. However, we need some answers from the Minister on both funding and accountability within the board, and some idea of the way in which the Government believe that there can be a cohesive landscape at the end of this process.

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[Baroness Oppenheim-Barnes]

My Lords, I am grateful to my noble friend Lord Eccles for tabling this clause stand part debate. I hope it will be for the convenience of the Committee—it will probably save time—if I combine my opposition to this clause with my opposition to a later clause

I did not have any friendly meetings with the Minister or anyone else—no 101s—and so I had to turn my attention to perhaps an even more appropriate body: one of the most distinguished past chairmen of the monopolies commission. He has authorised me to describe his objections to the CMA as it is proposed and says:

“The proposed corporate structure of the new Competition and Markets Authority points to a vast bureaucracy incorporating a range of vaguely linked but not cohesive elements, resembling a large government department. The result will be an enormous sprawling bureaucracy that over time is bound to swell and grow in size. It will be cumbersome to administer, and, inevitably, it will develop a large and costly administration”.

On the important distinction that exists under the present legislation between the OFT and the Competition Commission he said that,

“the distinction in the competition field between the investigatory and prosecutorial functions (OFT) and the judgmental functions of an economic tribunal (Competition Commission), that had been so carefully separated for over 70 years, since the Competition Commission … was formed, will become increasingly blurred within the new single organisation. This separation, which, in my view, is essential for the proper and fair functioning of an effective competition regime, has stood the test of time, and has been respected, and seen as a model, worldwide”.

He made it clear that, on ordinary references, the equivalent of the Competition Commission in the United States is not expected to report for at least two years, usually longer.

He makes an important point that the evidence of material failings in the present structure that could not be improved simply, without wholesale change, is not clear. What is the evidence of the material failings in the present structure that could not be improved?

There are certain important distinctions between the two offices at present. The OFT, a governmental agency like the prosecution services of the state, has a role in bringing proceedings before or referring matters to a body more expert in the conduct of hearings, collecting and reviewing evidence and making independent judgments. The Competition Commission, on the other hand, a body of independent members, is an independent tribunal which gathers and reviews evidence and makes rational and independent findings. The distinction between the two is very important and will be lost.

Over the years, I have had the greatest respect for the monopolies commission. Later, we will come to a clause which will sweep away and abolish the monopolies commission and the Office of Fair Trading after, as has already been said, the National Consumer Council, many other consumer bodies and others who have carried out very respected work over the years have been swept away. During the seven years in which I was responsible, in one way or another, for either the monopolies commission or the Office of Fair Trading, first in the shadow Cabinet in opposition and then in government, I was in touch with both. I found them all to be wonderfully run organisations, not least the Office of Fair Trading as it is now. Indeed, I was such a strong supporter of both that I still bear the scars of the blood I shed trying to get the implementation of their recommendation, in those days, to abolish the gas showrooms.

I fought it and fought it hard; it was a very painful situation. If noble Lords had been in the House of Commons when I announced it they would have some sympathy for me, but it was possible to do it in a different way, which was by denationalisation of the gas industry, and that was not down to me. The chairman and everybody I appointed to either body during that long period have performed their duties, they have not complained and they have done everything that was wanted of them, and today they are being offered a body—the CMA—a diagram of which we have been presented with. It looks to me like a diagram from a medical student’s textbook on some particularly nasty intestinal complaint.

These multipurpose, overlapping powers are said to be capable of providing quick and more flexible results than the regime which will be abolished. More worrying still to me is what seems to be coming in clauses further on. There is nothing in the Bill so far regarding the CMA’s responsibility to ensure that phase 1 and phase 2 of an investigation are both independent and secure. It absolutely should not be acceptable for the first result to be made known to the second investigatory department. There is no requirement for information about recommendations to be kept secret, which is a great omission. Even worse, staff members of a government department can become members of the board, which is a completely unacceptable situation. The board of the present Competition Commission was always completely independent and this is something that has to be preserved.

I turn to the very valuable services provided by the OFT in consumer affairs. So many things have already been swept away. We do not know yet what will happen in so many areas that we will be asked to vote on in the main debates as to be completely unacceptable. The National Consumer Council, as I have already said, has gone—a council that I was on, that I was chairman of, and which produced very carefully researched reports and recommendations. So good were these reports that I was invited—though I had nothing to do with them and I do not claim any praise for how good they were—by the Prime Minister of the day to ensure that I made my maiden speech in your Lordships’ House on the basis of one of its reports, on access to justice. I think that that says a lot for its value—and there were others, of course.

Under Clause 20, there are indications of the new regime that we might accept. In particular, there are lots of aspects of this that I welcome, such as the new role for trading standards bodies. I have always had the greatest respect for everything that they have done, and I cannot think of a better body to carry out such important statutory duties. I also note that NACAB will be expected not only to provide the service but to collate the information and report it where merited to the National Trading Standards Board. One should bear in mind that the members receiving the complaints are unpaid and voluntary, with different qualifications in different things, and they will not be the people who carry out a review and make decisions on what will be passed to the trading standards departments. So at the top they will have to have more people employed in the executive.

I noticed at Second Reading, which I was unfortunately not able to attend but watched in glorious technicolour from my sick bed, that my noble friend Lord Marland announced, to murmurs of joy, that he would increase the amount for Citizens Advice by £1.7 million. My short-term memory is not very good, but my long-term memory is extremely good. I answered a Question on financial assistance from my department for the citizens advice bureaux, in the other place, on 19 November 1979. My reply was:

“As I shall be announcing today, we shall be doubling the level of assistance in 1980–81, compared with this year. We shall provide £3 million next year”.—[Official Report, Commons, 19/11/79; col. 13.]

Today, that would be about £25 million. It is very important to make the point that if the CABs are expected to carry out this new role—I am sure that they will carry it out well, as they have always given excellent service, and I see no reason why they should not continue to do so—I cannot see how £1.7 million, even if it is only a one-year increase, is to cover all the extra work, which is paid work rather than that done by volunteers, that will have to take place.

Finally, I must express one of my most serious concerns of all. That is on the hiatus caused by the abolition of Clause 21 and whatever is put in its place in Clause 20, which at the very earliest could not begin to take place before April 2013, until the Bill has been enacted, or the positions have been filled—and no appointments can be made until the whole Bill is enacted. In that particular perspective, there is the need to provide a timetable for the new system in the Consumer Credit Act, which will be more or less paralysed during this period of delay. I will be very interested to hear what other noble Lords have to say and to what extent they agree with my concerns. I will wait until the actual clause comes up before I go any further on Clause 21.

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[Baroness Hayter of Kentish Town]

I am certainly not. I am suggesting that you need a person on the board with experience—I will come to that—but, on its own, this is not a sufficient condition for making the board work.

Let me now comment on what the Minister has said. If he expects the partnership to carry out the kind of role that consumer panels have carried out, he does not understand what consumer panels have done. A partnership that comes together once a month, once a quarter—I do not know how often it is going to meet; I think it has met only twice so far—simply would not be able to bring the right level of detail to the work of the CMA. Some of the matters the Minister mentioned are exactly those outside functions which will not be carried out by the CMA but by others.

I think I have touched on the problem of consultation. When it goes outside the family to Which? or Citizens Advice, it is put out in a pristine and finished way rather than at an earlier stage. It does not solve the problem.

We will need to think about this matter and possibly come back to it because it is vital to make this new authority work well.

[Baroness Oppenheim-Barnes]

Before the noble Baroness withdraws her amendment perhaps I may ask her a question arising from the statement made in advance by the Citizens Advice service, which is going to be the home of information, advice, education and advocacy on general consumer matters under the Regulated Industries Unit. This is one of the best pieces of news in the Bill because it will bring together the technical expertise, Consumer Focus and information gathered by the CABs and a unit to represent consumer interests in the regulated sectors—gas services, electrical services, postal services and so on.

This is very important because the regulatory authorities do not always appear to be sympathetic in areas in which they should be. It is not very gratifying or appeasing for consumers when one of the regulated bodies receives a multimillion pound fine for being in breach of their responsibilities because the consumers who have suffered do not receive a single penny of that. All they hear about is this very big sum and they do not know whether it has made any difference to the practices. Also, it has been a very long-standing argument of mine—and I hope that it will be solved by this—that Citizens Advice and Consumer Focus should be able to take up individual matters. That is important because the big regulators will not take up matters such as how the bill is presented. Very often bills are presented in a most confusing and frightening way. EDF sends out bills that look, at first, very frightening to the ordinary eye and certainly to an aged person—particularly when they see £1,000 appearing in big letters on the front, although it is not what they will in fact have to pay. It is an assumption of what they might have to pay if they used a certain amount of electricity, or whatever. This is an important provision and I hope that the noble Baroness will take account of that before she withdraws the amendment.

[Baroness Hayter of Kentish Town]

I thank the noble Baroness for those comments. The Regulated Industries Unit will be extraordinarily important but, of course, it will cover only post and energy, which is very restrictive. It will not be allowed a role in the sort of areas that the CMA will be dealing with. She raised an interesting question about where the individual goes to. One of the important things about a consumer panel is that it can gather the intelligence, be that from an ombudsman or any other form of individual complaints, and even go into the annual reports of companies to see how they have handled complaints. The panel can then use the intelligence to come to the CMA and perhaps say, “Look, we have done that homework. We know where this market is not working”. My fear is that Citizens Advice, with the best will in the world, will simply be unable to do that. We will have people coming through the door with a lot of debt problems, or who are homeless, or who have just been sacked by their employer, suffered water leaks or whatever. That ability to take intelligence, translate it into policy and feed that into the regulator will be beyond that organisation. That is why we will have to come back to this. However, for the moment, I beg leave to withdraw the amendment.

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[Viscount Eccles]

My Lords, this is a draconian clause. It follows a scheme of the Public Bodies Act in abolishing the Competition Commission and the Office of Fair Trading. It is not an even-handed abolition, because, as I have argued previously, the Office of Fair Trading really continues. It is changing its name to the Competition and Markets Authority, but it is in effect the OFT. I asked about Part 4 and did not get an answer to it. I asked why the Government had made the choice of creating a new body as opposed to continuing with the OFT, and did not get an answer to that either.

At the moment, I am yet to be convinced that these dramatic changes to the structure of the competition regime are justified. That needs to be seen against a background in which the annual cost of the OFT is somewhat over £70 million and the cost of the Competition Commission is somewhat over £15 million. So in the actual money figures, it is 80% the OFT and 20% the Competition Commission. I cannot accept that any argument has been made about money. It is not really claimed in the impact assessment—“ultimately” is the word that is used. I simply do not see that this is an important consideration in the change in structure, and I am conscious of the need to restrain public expenditure. It is said in several places in the Bill that all that this provision is intended to do is to make it somewhat more straightforward for the two organisations to reduce their costs in line with the existing government public spending targets.

We are left with a situation whereby the OFT is taking over the Competition Commission. The commission is disappearing as an executive body and will have no management role—it will not manage itself. It is being turned into panel of mostly, if not all, part-time members—we have not been told—who are part of the Office of Fair Trading. The risk that this will go wrong greatly outweighs any benefits. We have already talked about the need to do things in a more timely fashion. How could I disagree with that? I remember carrying out investigations and coming up with an answer pretty quickly, and it can of course be done under the existing regime. There is nothing wrong with the law.

The money and the timeliness have gone. What else is left? Something is said about the duplication of the provision of information but, unfortunately, I do not see how that holds because if you make a reference, surely the people who will come to some form of judicial judgment have to start from a zero base. They simply cannot rely on what has been done before. Of course they will gather as much information as they can, but that will not stop them needing to obtain self-standing information of their own, in order to come to a semi-judicial decision.

I ask my noble friend: has the department taken legal advice? Has it been to the Attorney-General? The risk that this regime will be challenged is real. I am not just making it up. I cannot see where the benefits outweigh the risk. It seems to me that the risk outweighs the benefits by many times in terms of both time and money. I urge my noble friend to go back and give this another thought because, quite honestly, the game is not worth the candle, the risk is far too great, and the benefits do not exist—and if they do, I have not been told about them. I cannot even imagine what they will be when I am told about them, but I should like to hear them.

I remain unconvinced, as my noble friend Lord Razzall, who is no longer in his place, said. I conclude by saying that I am not in any way casting the smallest of aspersions on the noble Lord, Lord Currie of Marylebone. How could I do that? I was born in the borough of Marylebone. What he has done was done in good faith—being taken on as chairman-designate of something that, at the moment, I believe to be a greatly mistaken structure.

[Baroness Oppenheim-Barnes]

My Lords, the Committee will be delighted to hear that because I have already made a number of points regarding Clause 20, which obviously related to Clause 21 also, I will not repeat them. However, I must continue to express the concern that was not answered, although I made the point, about the period of hiatus between enactment and the appointment of the new board. None of that can take place. I do not know what the housekeeping requirements are regarding new buildings or offices, but the fact remains that it will be a very damaging hiatus. In particular, as I mentioned at the time, is the effect that the Bill will have on the Consumer Credit Act. Appeals that are brought under the Consumer Credit Act will be in some sort of abeyance. Nothing will happen until the new legislation is enacted and all parts of the various appointments to the two bodies that we have been discussing this afternoon have been made. A lot of concern has been expressed by those in the financial sector about this and we deserve some sort of answer at this stage.

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[Viscount Eccles]

Before the Minister replies, I would like to thank the noble Baroness for her comment. There may well be another, very general, explanation. I have worked in the public sector in a number of different bodies. I once received a letter saying that the Minister understood that I did not wish to be reappointed to this body because I was too busy—it was a Department of Trade and Industry body—but that was not the reason. The reason was that I had attended a meeting and voted against a grant to a company because I thought it was not a sound company. However, the grant was passed and paid out and the business went bust. I was too clever because I had got it right and so I had to be removed.

There are few of us here but this important general explanation will be reported in Hansard. There is a strong wish in departments—this is a general comment—to reduce the independence of public bodies, to centralise their activities and to get them back as close to the Ministry as they can. The Competition Commission has been an independent body for 60-something years, so how did it get into the Public Bodies Act that these two organisations would be merged? It cannot have got in as a result of the Cabinet Office saying, “Have you got any good ideas?” There must have been somewhere in the purlieus of BIS a document saying, “Would it not be a good idea to reform the competition regime?”

I believe that this merger has not ever been given the proper consideration by the Government that it needs to assess the risk in what is proposed, and to offset that risk against the apparently negligible benefits.

[Baroness Oppenheim-Barnes]

To add to what my noble friend has said—we are fortunate to have him here today—I would like to know whether the Bill ever went through Cabinet. I find it difficult to believe that some of these points would not have been raised at that time, and properly so.