Consumer Rights Bill

Baroness Primarolo Excerpts

Tuesday 28th January 2014 Commons Chamber

[Stella Creasy]

My hon. Friend is spot on and shows why the Bill falls short. That issue in the furniture industry reveals the problems that we have with the ombudsman system. I will come on to that matter and talk about her work on it.

The first question that we want to ask relates to the role of competition and challenge within markets to produce choice and value for money, which the Secretary of State spoke about. We agree that competition is a key driver of quality, innovation and personalisation in products, goods and services. However, in many markets in Britain, people are paying over the odds for essential goods and services because the barriers to entry into those markets have created dominance for a small number of providers or because there is outdated regulation. The existence of many companies does not always mean that there will be competition either. The ability of small firms to compete with larger providers is a key element of a free and functioning market.

If the Secretary of State wants examples of where those problems lie, there are many. My right hon. Friends the Members for Doncaster North (Edward Miliband) and for Don Valley (Caroline Flint) and my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) have been clear about the broken nature of our energy markets. Six companies dominate the retail market in the UK, supplying to 98% of the domestic market and 82% of the smaller business market. The fact that no new entrant has managed to challenge that dominance suggests that there are significant barriers to newcomers that inhibit competition. That is reflected in the prices that consumers pay. A lack of competition in the retail market for energy has resulted in consumers paying £3.6 million more than they need to every year. Switching levels in that market are the lowest that they have been for years. The low levels of switching mean that the big energy companies have a captured market, which again reduces the incentives to keep prices competitive.

It is not only in the energy market—[Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. We require only one speaker at a time, so I would be grateful if the hon. Member for Suffolk Coastal (Dr Coffey) would stop shouting across the Chamber.

[Stella Creasy]

Thank you, Madam Deputy Speaker. I would be delighted to take an intervention from the hon. Lady at any point if she would care to make one. I am sure that whatever she is chuntering from a sedentary position is absolutely fascinating.

It is not only in the energy market that we see such problems. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the hon. Member for South Derbyshire (Heather Wheeler) have highlighted similar problems for consumers in the pensions market. The current restrictions on the operations of the National Employment Savings Trust mean that it is impossible for it to compete with other providers, to the detriment of consumers. It is a market where hidden charges and fees create problems for people. There are penalty charges for people who want to change jobs and exit charges for savers who switch schemes. Which? found cases of consumers having up to 50% of their savings being absorbed by such charges and costs.

If the Secretary of State does not believe me on the energy and pensions markets, let us look at my passion, the payday lending market, in which a lack of competition is clearly causing problems for consumers. Not every consumer in that market gets into financial difficulty, but enough of them do because the way in which it operates causes huge detriment to the consumer and huge problems for our economy. The National Audit Office estimates that unscrupulous behaviour by firms in that market costs consumers at least £450 million a year. The lack of competition to provide services to the customers of those companies, as well as a barrier to accessing alternative services being created by borrowing from them in the first place, enables the exploitation of their customers.

If the Secretary of State is not interested in the impact of high-cost credit, perhaps he will look at the banking market. My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) and the hon. Member for South Northamptonshire (Andrea Leadsom) have again highlighted the raw deal that consumers get. The pricing power of big banks means that they dominate the market in key products such as mortgages. Banks are able to retain their dominance by making it hard for customers to move their custom. Some 1.3 million people have switched their current account in the past year, which is a churn rate of just 2% to 3%. Studies show that a truly competitive industry would have a switching rate nearer to 10%. It is not only in the dominance in the current account market that we see problems. When banks are able to set their own terms, they can set requirements such as those for buy-to-let mortgages that force borrowers to offer only short-term tenancies, which are causing problems in the housing market.

Given the Secretary of State’s speech last night and his commitment to competition, I would have thought that a healthy dose of competition across the sectors I have mentioned for the benefit of consumers is what the doctor would have ordered. However, we do not see that in the Bill.

The second question that I want to pose for the Bill is about the importance of information flows, which is linked to free markets. What are the Government doing in the Bill to address the information gaps and asymmetries that enable consumer detriment? We know that data are vital to ensuring that consumers may compare goods and services in order to make their own choices. We know that a lack of information helps providers to hide behind confusion and a lack of transparency. The Government’s own research shows that if consumers knew more about products, they would be able to gain £150 million to £240 million a year. However, only 13% of those who use price comparison sites get the lowest priced deal. The Government admit that one reason for that is that people do not have accurate information about their past usage and therefore find it difficult to predict future usage.

We are at the bottom of the European league for consumers being able to switch and shop around to get the deals that they want. The contrast with countries such as Australia is clear. Mass movement switching campaigns have led to one in four Australian citizens being part of schemes that get them better deals not just on energy, but on health insurance and financial services.

Consumers have legal rights to request access to personal data, but half the respondents to Which? were not even aware of that right and very few people have exercised it. I am sure that the Secretary of State will point to the midata project, which is a voluntary scheme to give consumers access to their energy, mobile and financial services data. However, that scheme has struggled to have any impact for a simple and obvious reason: companies have little incentive to release commercial data that could convince a customer to go elsewhere. We welcome the fact that the Government took an order-making power through the Enterprise and Regulatory Reform Act 2013 to compel certain businesses to release such data, but that affects only four core sectors and has not yet been applied. It could be applied more widely if secondary legislation were used. That is another missed opportunity in the Bill. Let us revise the Bill to unlock the capacity of information to improve outcomes for all consumers and citizens.

That capacity would help in many sectors. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) has run a tireless campaign, for example, on the lack of clarity in supermarket pricing. We have seen how some deals and special offers mislead shoppers when clear information is not provided. There are products that are more expensive than the original price when they are in a multi-buy offer; products that have been at a sale price for longer than the original price; and products whose prices are increased immediately before they go on offer, to make the discount appear more significant.

Supermarkets, like many other industries, hold a wealth of data about us as consumers that they use to design their pricing strategies. Making those data easily available—in principle, they are already public data—could transform consumers’ power to shop around and to know a good “buy one, get one free” deal from a dud one, unlike some coalition voters, I suspect.

Or the Secretary of State could learn from my hon. Friend the Member for Sefton Central (Bill Esterson) and the hon. Member for Edinburgh West (Mike Crockart) and use the Bill to help consumers protect their data and to deal with nuisance calls, which I know many Members are frustrated by. I know that the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Cardiff Central (Jenny Willott), who is in her place, has campaigned on that issue. We know that 71% of landline customers say that they have received a live marketing call and 63% a recorded marketing message. The Information Commissioner receives 2,500 complaints a month from people sent unsolicited text messages, usually for debt or payment protection insurance claims. With 75% of landlines being registered with the Telephone Preference Service, the number of complaints shows that something is going seriously wrong. Again, the Bill will do nothing to help consumers protect their own data, which will be to their detriment.

We know that it is not enough just to have data, because they are not a disinfectant if the curtains are closed to the sunlight. Helping people make the right decisions the first time is key to outcomes, yet many people, especially those with complex needs or a lack of confidence, struggle to get the information and advice that they require to make effective decisions. In turn, that generates cost to the public purse, including the costs of putting it right. I know that the hon. Member for Mid Norfolk (George Freeman), who is in his place, feels strongly about that subject.

We know that when good advice is provided, services are improved. Indeed, one study in Nottingham showed that 40% of the cases dealt with by a local advice service referred to poor decision making in the public sector—what was called “preventable failure in the system”. A project that piloted advice services working with the council showed that 60% of those issues were preventable. When we see such studies and the impact of good advice and good access to data, the question is why the Government are not truly empowering consumers and citizens to bring them the benefits of the right changes. Why does the Bill not offer any action on that?

Where the Bill does offer input is on contract terms. It sets minimum standards that supplied goods must meet, sets out that they should be fit for purpose and satisfactory, and provides a legal right to reject faulty goods within 30 days of receiving them. Again, however, consumers will ask whether that will deal with the real problems with terms and conditions that they face time and time again. That must be our third challenge for the Bill.

A lack of clarity about prices causes many of us to purchase products that are not suitable. It is about the most basic of consumer needs—to know the cost of the product that we are purchasing and what our money will buy us. Prominent pricing is not the same as transparent pricing. Hidden charges are a problem for too many in our society. One study found that buying insurance through a broker could push up premiums by £500 a year, and that the gulf was caused largely by the added expense of the broker’s fees.

Many consumers experience the frustration of signing up for services or goods and then finding that the terms and conditions are varied because the prices are not clear. A constituent wrote to me this week about a website called Tax Return Gateway, a copycat of a Government website that looks suspiciously like the real deal. My constituent was charged £500 for filling in her tax return, and only after she had paid it was she told that that was the fee for the service, not the tax return itself. Such sites exist for a whole range of public services, including passport applications, visa programmes and driving licences. It seems a simple principle that people should be told the price before they purchase something, but again, the Bill will do nothing to provide for that.

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[Stella Creasy]

If the hon. Gentleman will forgive me, I am conscious of time and want to press on.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I heard the hon. Lady say that she wanted to press on. May I point out to her that she has been speaking for more than 40 minutes now? She has been generous in giving way, but I would be grateful if she could conclude her remarks so that other hon. Members can participate in the debate.

[Stella Creasy]

I promise you, Madam Deputy Speaker, that I, too, want to conclude my remarks.

The Bill does not deal with the European directive on alternative dispute resolution, which the Opposition will want to look at in Committee. The Business, Innovation and Skills Committee has said that that needs to be dealt with. There is also a need for a stronger take on the role of trading standards. The Secretary of State seems to believe that trading standards, which are desperately short of resources, can deal with many of the problems. We know that most consumer detriment happens at local level, and therefore that we need to do more to help people to take action at that level. The Secretary of State has not told the whole truth on cowboy builders. Many builders repeatedly rip people off, and yet there is little provision locally to take them on. The Opposition believe that the Bill has a role in doing something about that.

The Opposition also believe that there is a role for the Bill in dealing with the broader social impact of changes. I would flag up prepayment meters and premium phone lines, in relation to which there is a need for a broader social concern in the role a regulator can play.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. When I say that the hon. Lady needs to conclude her speech, I do not mean that she should speak faster through what she has left to say; I mean that she should finish her speech with a few sentences. I would like her to do that now. That is not an opinion, but a request, and I expect her to do it.

[Stella Creasy]

It is a request to which I willingly oblige.

Suffice it to say, the Opposition look forward to the debate in Committee. I hope we have set out that there are many more things we can do in the Bill. We believe that we should make the pound in our pocket truly powerful. We hope the Government join us in that ambition.

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[George Freeman]

I will not take interventions because of the instruction from Madam Deputy Speaker to keep moving.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I was addressing my remarks only to the hon. Lady at the Dispatch Box speaking on behalf of the Opposition. If the hon. Gentleman or any other hon. Member wants to take interventions, it is entirely up to them. I have not put a prohibition on interventions.

[George Freeman]

Thank you, Madam Deputy Speaker, for that very helpful clarification. If I can finish my point, I will happily take an intervention.

I welcome the fact that there will be one simple Act to govern what has hitherto been covered by 12. I also welcome that, underpinning the Bill, are core consumer principles. People will have the right to get what they pay for; for goods and digital content to be fit for purpose; and for services to be provided with reasonable care and skill. We will also have the right to have faults in purchases put right free of charge, or to be provided with a refund or replacement. The reforms will enhance measures to protect consumers when appropriate.

I welcome the deregulation to reduce business burdens and costs. I also welcome the modernisation of the legal framework to ensure that consumer law keeps pace with technology. It clarifies the law when it is written in legal jargon and streamlines consumer rights, remedies and enforcement powers.