Consumer Rights Bill

Debate between Stella Creasy and Angus Brendan MacNeil

Tuesday 28th January 2014 Commons Chamber

[Stella Creasy]

I want to come on to precisely my hon. Friend’s question about trading standards, and about how to have stronger powers for consumers at local level, which is one issue that the Bill does not seem to understand or to address.

I am honoured that the Secretary of State made time this morning to read my article for PoliticsHome. I, too, took the time to read his speech last night, and I very much enjoyed his attempt to use Jedi mind tricks on the Government. In particular, he paraphrased one of my personal heroes, Obi-Wan Kenobi, in his attempt to claim that “This is not the recovery you are looking for”, which is recognition that consumers are bearing the burden of this Government’s economic policy as a result of their lopsided attempt to balance the budget. I am therefore glad that the Secretary of State has acknowledged that growth is being driven only by consumer spending, because many of us are concerned about the impact of that.

Although the Secretary of State celebrates the idea that consumers have dipped into savings that they hold for a rainy day, I have to tell him that he is mistaken to presume that they have done so only for long-term investments. His own Money Advice Service shows that a third of British people have no money put aside for rainy days, due to the everyday costs of living, and that those who have such savings have been forced to dip into them to cover those costs, with three quarters of the people surveyed having been hit by a bill that threw them off-budget in the course of the past year. Indeed, a third of people in our country who now have no savings at all have said that not having a high enough income is the problem causing them not to save. We agree that we should be extremely worried about an economy in which, every day, people get further and further into personal debt. We are also worried that when the Government are presented with an opportunity to do something about that, they stand aside. They talk strongly about national debt, but say nothing about personal debt.

I know that the Secretary of State will want to blame the Treasury for the National Audit Office’s damning indictment that Government failure to assess the impact on consumers of investment in infrastructure might lead to consumers facing financial hardship and unplanned taxpayer support being required. That damning report shows that Whitehall Departments are forgetting the needs of consumers, and therefore the cumulative impact of household bills. I know that some in the Government want to cast the Public Accounts Committee as the dark side, but I fear that consumers will feel the Sith inhabit the Treasury, not Committee Room 16. Why does the Secretary of State therefore not use the Bill to address that gap and to help such hard-pressed households, as well as to show that he gets the need to tackle the rip-off charges and broken markets in goods and services that they face?

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Lady agree that companies selling products often overlook the rights of consumers on islands and in some rural areas, saying that they will not deliver to them, and often overlook the best distribution network, which is the Royal Mail? Does she agree that the Bill should ensure that consumers who do not live on the mainland are given equal access to the market?

[Stella Creasy]

The hon. Gentleman makes some strong points about exactly the kind of contracts that consumers get into and the kind of service standards they should expect. That the Bill will simply consolidate existing rights, rather than address some of the challenges, shows that it could go much further on such issues.

It would not take much to make a real difference to households across this country. The Money Advice Service research shows that if consumers saved just £3 a day, it would be enough to cover their average unexpected bills in a year. That may not sound like much, but for millions of British consumers who have already used up their savings or are getting into debt in dealing with the cost of living crisis created by this Government, it is a stretch. For millions of people, reducing their outgoings would also make a real difference to their financial precariousness. The Centre for Social Justice has estimated that about 4 million British families do not have enough savings to cover their rent or mortgage for more than a month, and that more than 5,000 households became homeless in the past year alone because of arrears.

I hope that the Secretary of State will at least do better than his Cabinet colleague, the Prime Minister, who denies that living standards are falling as the public pay for the cost of this Government’s policies. The Prime Minister claims that it is a matter for statisticians to argue, but I hope that the Secretary of State agrees that it is a matter on which politicians should help out. It is not our role to make decisions for consumers, but it is our role to help to make decision making easier.

We could also help with the cost of living crisis, because it is about not just job creation, but every extortionate charge to which the Government turn a blind eye or every broken market they ignore, and that all adds to the struggles that people face. Every unfair service contract term and every bad decision that consumers are duped into making is more money down the drain.

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[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.

[Mr MacNeil]

The hon. Lady raises an important point. There are scam versions of Driver and Vehicle Licensing Agency sites, and many people do not understand what they are purchasing, far less the costs of it. They do not realise that they are only getting a form to apply for a road tax disc or whatever.

[Stella Creasy]

The hon. Gentleman is absolutely right, and if the Bill met the test of providing the best consumer rights framework that this country can have, such scams would be addressed. Again, we find the Bill wanting on that point, and we will look to address such challenges in Committee.

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[Stella Creasy]

The Minister raises an interesting question about why, if the Bill will simply consolidate powers that she says are already effective, she does not use the opportunity to go further and deal with matters that she considers to be outside the legislation. She cannot have the argument both ways—either we need new consumer rights in this country, or we do not and she is wasting everybody’s time. Labour Members think there is a case for a new, stronger consumer rights legislative framework, which we are trying to set out, and part of that is about redress. I am delighted to hear that the Minister’s constituents have got redress for their mobile phone coverage, but I hope she will also consider how we can use the Bill for things such as nuisance calls, which she mentioned. This is about how we tackle such problems once and for all.

[Mr MacNeil]

There is a second problem with mobile phones as well as when a mast breaks down. There is also a lack of sharing and networks across the UK are incomplete. A customer of a certain network can travel to certain places and find no coverage at all. Mobile phone companies could share masts, but the renting and price structure around them militates against that and makes it an expensive thing to do. If something in some Bill somewhere were to tackle that, consumers who use mobile phones would have far better services in the UK than they do at present.

[Stella Creasy]

I thank the hon. Gentleman for his contribution, and I will come on to whether the voice of the consumer is strong enough with the regulators. That is the sort of issue a regulator could consider, because not all people access services in the same way.

With that in mind—I am conscious of time—I will press on to the final question that we will set for the Bill in Committee, which concerns whether it has a clear enough framework for when things go wrong. We know that absence of enforcement gives an advantage to firms that break the rules, whether in a local community or nationally. Consumers are getting a poor deal and providers are getting away with it because there is little accountability or likelihood of prosecution. Giving consumers a stronger voice in the regulation of goods and services would enable consideration of the consequences of the different way that services are managed among different groups in society.

Again, the Bill could have led on that and tackled the problem. The concept of an ombudsman is clear in principle, but confused in practice. There are at least 17 different ombudsman services including the Financial Ombudsman Service, the local government ombudsman, the housing ombudsman, the pensions ombudsman and the legal ombudsman, as well as the parliamentary ombudsman and the health service ombudsman. In addition, there are also 14 recognised complaints handling services, including the Advertising Standards Authority, the commissioner for young people, the Information Commissioner and the schools adjudicator. However, not all ombudsmen and adjudicators are the same. Some exist through European and UK statute, such as the housing ombudsman, but others have been set up by the industries as voluntary bodies.

Let me return to the point raised by my hon. Friend the Member for Bridgend (Mrs Moon), who has sadly left the Chamber, about the furniture industry where we see such problems at first hand. The furniture ombudsman was set up as part of the Furniture Industry Research Association and is the only profit-making ombudsman service in this country. Some sectors have one ombudsman, but others have many. Businesses can pick and choose which they sign up to, further complicating matters for consumers. The lack of clarity about what an ombudsman could do and what powers it has is a problem for all consumers, and I say to the Secretary of State that tweeting about the issue or using social media is not the way to address it. My hon. Friend the Member for Makerfield (Yvonne Fovargue) has been diligent in raising the case of Farepak consumers, which seems exactly the point at which a stronger and clearer ombudsman system would come into play.