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Michael Fabricant: Is there not the greater danger that the DTI will not only adopt the directive but gold-plate it? The temptation in the UK is always to over-regulate, whereas our European competitors do the opposite—or, at the very least, adopt a directive without any gold plating.

Mr. O'Brien: I am grateful to my hon. Friend, but his intervention should not be interpreted as a criticism of the diligence and expertise of those officials who must deal with the implementation of EU directives into UK law. Although I do not want to go too far down this road, my hon. Friend's question is pertinent and deserves a direct answer. Reconciling administrative and legal systems in all EU member states presents a permanent challenge. In Britain, our legal system causes us to adopt an approach based on means as well as on ends. By contrast, member states in continental Europe have inherited legal systems based more on the Napoleonic code, which leads them to prescribe the ends and to leave the means to discretion.

The British approach causes us to gold-plate directives, as my hon. Friend the Member for Lichfield (Michael Fabricant) said, and to over-implement them. That is becoming a menace, as it applies friction to the competitiveness of British business. The directive in question directly contradicts some of the proposals in the Bill, and it is important that we draw attention to that. I know that the Government are seized of that already, as they have made their representations on the matter known, but it is worth putting the issue on the record.

Mr. Sutcliffe: I forgive the hon. Gentleman for his attack on the Government, but the consumer credit directive is a serious matter. The first proposal was adopted in September 2002. In all our work on this Bill, we have kept in touch with the industry and monitored how it and other groups have felt about the proposals. However, the potential impact of the directive is outside the scope of the Bill. We had to decide whether to wait for the directive to win agreement among member
 
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states, or to get on with work on the Bill, given that 30 years had elapsed since consumer credit was last subject to legislation.

Mr. O'Brien: I understand why the Government have made the judgment that they have made, but I am sure that the Minister will accept that this is a matter of principle and that it is right, in a Third Reading debate, to ensure that it is placed on the record.

Representations were made to the Government during the consultation process, but the Minister will know that the industry is constantly in touch with members of all parties on these matters. That is understandable, as it sometimes feels that the consultation process with the Government does not carry great weight and that another approach has to be adopted to ensure that matters are given an appropriate airing. The tendency to gold-plate directives identified by my hon. Friend the Member for Lichfield, and the potential discord over implementation are worth putting on the record, not least so that those in the other place are aware of all the issues that have been raised in this debate when it is their turn to consider this Bill.

As I said, the burdens imposed by this Bill on the consumer credit industry are not insignificant. According to the Department of Trade and Industry's website:

"licence fees will approximately double to around £220 over five years for sole traders and to £550 for incorporated bodies . . . There are also new requirements for provision of post-contract information, which we estimate to be around £1,000 one-off for a small business, £5,000 for an intermediate business and £20,000 for a large business."

I am also concerned that implementing the provisions in the forthcoming EU consumer credit directive will further jeopardise one of the Bill's aims. I took note of the Minister's saying that the issues under discussion are, in his view, largely outside the scope of the directive as it is anticipated, but that the idea is to make it much easier to challenge unfair loan agreements. On that point, we coincide.

Already under this Bill, there are at least three ways of dealing with unfair or inappropriate lending practices that affect consumers. They can challenge unfairness through the new "unfair relationships" provisions in clauses 19 to 22. Under clauses 59 to 61, they can take disputes to the Financial Ombudsman Service for resolution. Alternatively, they can complain to the OFT or to their local trading standards authority, which, under the Bill, have enhanced powers to deal with lenders through a reformed licensing system.

I am not sure that the Government have necessarily considered the confusion that this array of options could cause for consumers. So I hope that the Minister will explain the basis on which consumers are expected to make an informed choice between the courts, the FOS, the OFT and their local trading standards authority. I hope that he will also confirm today that there are no plans to introduce further options for challenging unfair agreements, if and when the new directive is transposed into UK law. The current options in the Bill seem more than sufficiently widespread, and could already lead to lack of certainty and confusion.

It is possible to argue that the Government's motive in introducing this Bill and its rather rushed passage through Parliament are unimportant issues. Of course,
 
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people will draw their own conclusions, but given the need for such legislation and the general support for it from the official Opposition, from the minor political parties and from business organisations and consumer groups, should we not simply trust this Government, take their word for it and rubber-stamp the Bill? The answer, of course, is no: we cannot and we should not. It is not possible, in my view, to trust a word that this Government say any more, particularly given their addiction to presentation. Moreover, we must scrutinise the Bill as best we are permitted—in this House and in the other place—given this Government's command of the parliamentary timetable. We owe that to those who back the principle behind the Bill—as, indeed, do we—but who have serious and justified doubts about some of the detail, or lack of it.

In particular, the provisions relating to unfair relationships and the OFT's new licensing regime have given the consumer credit industry cause for concern. As I made clear on Second Reading, I share reservations about the wording of—if not the intention behind—the relevant parts of the Bill, and I also believe that both these provisions reflect this Government's potentially unsatisfactory habit of seeking to empower regulators in order to absolve themselves of all possible blame. This has the twin effect of encouraging regulatory creep—the flow of regulations has increased by 50 per cent. under Labour—and of dispersing and undermining proper parliamentary accountability.

The major Government regulators now spend three times the amount spent before Labour took office, with twice the number of bureaucrats. It is surely unacceptable that, on top of this, the regulators' regulator, the so-called Better Regulation Task Force—a highly questionable title—is forced to admit that there are now so many regulators that no one in government knows how many there are.

Returning to the "unfair relationships" provisions in clauses 19 to 22, it is surely a statement of the obvious to say that good regulation—not to mention the comparative "better regulation" favoured by the Government—should set out clearly and simply what is intended and what the obligations of business will be in order to meet the new requirements. The CBI has made clear its view:

"Clause 19, which sets out the substance of the new test, is too wide and too imprecise to bring about necessary certainty and clarity in the legislation. This is particularly when it is combined with Clause 22 (4) which states that when an agreement is challenged on the grounds of an unfair relationship it will be for the creditor to prove to the contrary. This is extreme and provides far too high a burden on traders."

This lack of clarity is also a serious problem for parliamentarians, who are unable to fulfil their democratic duty to scrutinise Government legislation, as well as for businesses, which face uncertainty as to their new obligations. For those reasons, I specifically asked the Minister on Second Reading for his assurance that OFT guidance on draft relationships—it is important to make it clear that I am referring to the guidance on draft relationships, not the guidance on fitness—would be made available before the Bill entered Committee. I would be happy if the Minister were to correct me, but as I understand it, although the OFT draft guidance on fitness was provided in Committee, the guidance on unfair relationships was not. According
 
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to the Library, where I checked yesterday, that guidance, which I was promised on Second Reading, was not available in Committee.

I hope that the Minister will produce that guidance. The matter is important, because it raises the suspicion that the OFT is not ready and has not thought the matter through. I am sure that the OFT is the last organisation that would want to embarrass the Minister, who wanted to make all the information available, and I hope that the explanation does not involve incompetence. We must see the draft OFT guidance on unfair relationships. My hon. Friend the Member for Tewkesbury used the guidance on fitness in Committee, and he has kept me fully informed.

Whatever the reason why the guidance on unfair relationships was not produced, it damaged our ability to scrutinise the Bill. The Minister is surrendering authority to a regulator that clearly feels no urgent duty to be accountable via him to this House and to the citizens, consumers and businesses represented by hon. Members. I am sure that the other place will focus on that issue, and if the OFT has still not lived up to the Minister's promise, their lordships will be justified in being highly critical and in considering delaying the passage of the Bill. I hope that a delay will not be necessary, but the matter will be taken seriously in the other place.

We all know that the absence of necessary detail makes for bad law, and that is also true of the      retrospective implementation of the unfair relationships provisions for all existing agreements following a 12-month transitional period. As the guidance in the 1974 Act on extortionate arrangements is being repealed, until the new legislation is tested in the courts, companies have no clear idea of which adjustments they should make. I acknowledge the point about transitional arrangements, but the legislation is designed to enable companies in particular to achieve clarity and certainty, which is why the guidance should be on the face of the Bill.

The unsatisfactory provisions on extortionate credit are being replaced with, at least in the short term, a legal vacuum. The Council of Mortgage Lenders has said:

"This flies in the face of assurances from DTI as late as September 2004 that while retrospection would be adopted in principle, lenders would not be financially liable for mistakes occurring before the Bill became law."

Members of the Committee and I have received numerous representations in the same vein from across the consumer credit industry.

The amendments tabled by the official Opposition would have avoided uncertainty for businesses by ensuring that the provisions would not apply to agreements which were established before the Bill's enactment, and I regret the fact that that the Government did not have the good sense to adopt them. I am confident that their lordships will study the advocacy of my hon. Friend the Member for Tewkesbury in representing those concerns and in providing the Government with an opportunity to restore clarity, fairness and balance in line with the long-held principle and custom that legislation should not, save in the most exceptional cases, apply retrospectively.
 
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I foresee that that particular issue will consume much of their lordships' time and expertise, and it could delay the passage of the Bill, although I hope that the Government will avoid that outcome. That serious concern remains unresolved, however, and it continues to generate many representations to me and my hon. Friend.

The OFT guidance on licensing is available, which is all the more the reason why the guidance on unfair relationships should have been available in Committee. The issue remains that the Secretary of State and the Government will have no direct influence over the OFT once the Bill has transferred powers away from this place. I am not often to be found arguing that Secretaries of State should be given further statutory powers, still less that they should do any more "nannying". However, it should not be forgotten that an independent regulator and a Department of state have very different remits. The Department of Trade and Industry has a responsibility to promote the health of the consumer credit industry and business competitiveness in general, while the OFT has a duty, and consequently a regard, only to protect the consumer. There are therefore consequences of transferring powers in the way proposed in the Bill.

I regret that the Government have resisted the amendment tabled by my hon. Friend the Member for Tewkesbury that would have given the Secretary of State the right by order, subject to affirmative resolution, to vary guidance to the OFT, or issue further guidance, about the issuing of standard licences. Where guidance exists, it appears to be beyond accountability to Parliament; where it does not exist, there is no possibility of adequate scrutiny.

In Committee, the Minister told my hon. Friend that he did not entirely challenge the statement that the Bill was "wholly vague". That sounds to me like a polite way—the Minister is unquestionably polite—of partly accepting that the Bill is partly vague. I agree with that. I support the Bill on the basis that the present legislation is badly in need of revision, but I regret the fact that consumers, businesses and Members deserve and require more detail than has been provided in the Bill, particularly on its face. I am confident that the other place will carefully note those concerns, which centre on the Government's reluctance to publish the OFT guidance, at least in draft, in relation to unfair relationships. That is integral to proper consideration of the Bill. In addition, there are the Government's inadequate attempts to justify breaking from long held and well founded parliamentary convention not to legislate retrospectively so long as it is unclear what companies need to do.

I was struck by interventions during the last group of amendments on Report. The Minister was, in an adjective I used at the outset of my remarks, steadfast in resisting publishing a list of what companies have to do. He was supported by the hon. Member for Gordon (Malcolm Bruce) in the suggestion that there is a cultural issue, which, at least in part, there unquestionably is, but it would be helpful to know whether he has a list that he thinks it would be unhelpful to publish or whether there is no list at all. If there is none, I am even more concerned that the Government are taking a deliberate risk and that it is being left to the courts to set benchmarks, standards and precedents.
 
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Inevitably, the difficulty will be that that will be piecemeal. We cannot predict what set of circumstances, what facts, and which plaintiffs and defendants—with what financial resources—will go all the way through to the courts.

I hope that the Minister will take note of that important consideration, and that it will get a broader airing in the other place. On that basis, and anticipating their Lordships' consideration, we are content to let the Bill proceed and do not wish to divide the House. We wish the Bill well, but we wish for further clarity and detail in future.

4.43 pm

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