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11 May 2006 : Column 567
It is true to say that neither the Minister nor I exactly tower over the Dispatch Box. I can recognise that, although I often feel that good things come in small packages. It has been unkindly suggested that many hon. Members look forward to him and me debating the working at height regulations.
We welcome the opportunity to discuss this issue today. The Minister set out the Government’s stall. I have to say, without causing him too much concern that things are getting a little too consensual, that we welcome much of what he had to say. However, there are questions of principle and practice that I want to raise.
Why do we need consumers to be confident? In this context, that means that they should be informed and empowered. I contend that confident consumers will encourage higher standards among manufacturers, shops and other service providers. Equally, informed consumers can better recognise and avoid the scams or frauds that the Minister described.
Confident consumers also encourage innovation and good value simply by using their spending power wisely. Sectors such as information technology or the computer games industry show how consumer feedback directly affects future product development. That increases our competitiveness and productivity and so contributes to making this country the best place to do business. Sadly, there remains considerable room for improvement: in 1997, when the Minister was last in the Department, the UK was the world’s fourth most competitive country, but it is now the 13th.
Informed and empowered consumers are good for their own welfare and for the economy as a whole, but what do those qualities mean in practice? Informed consumers know what advice they need and where to get it. They understand the consequences of their purchasing decisions but, with new and more complex products and services entering the market each week, providing that information is increasingly difficult. Ironically, it is in the areas where the financial consequences are greatest—financial services, for example—that consumers are often least well placed to make informed decisions. Indeed, I recently hosted a seminar on consumer credit that looked at issues to do with financial exclusion and education. We also examined ways to ensure that consumers are enabled, rather than trapped, by the choices that they make.
Mr. David Drew (Stroud) (Lab/Co-op): The Financial Services Authority is tasked with doing a lot of work in the area of consumer and financial education. I believe that the jury is still out on whether it has been effective, or whether its approach has been too laid back and complicated. Does the hon. Gentleman agree that it would be good to know how much impact that work has had in schools? If younger people do not have the relevant knowledge, we will all be—to use the old expression—doomed.
Mr. Prisk: I hate to admit that I am of the generation that understands the reference that the hon. Gentleman makes—but he is right that we need to establish the FSA’s role in education. It has not been
engaged in the process long, and some would say that it could face a conflict of interest in trying to be both regulator and educator. When the Government go ahead with the financial services consumer panel, it will be interesting to see what sort of relationship the panel has with the new advocacy bodies.
Empowering customers cannot be achieved simply through education and information. Customers also need to have confidence that appropriate and convenient means of redress will be available and enforced, when that is justified. Clearly, there are many forms of redress to deal with the different harms that consumers can suffer, but they need to be accessible and effective.
The Minister referred to the ombudsman system. It has worked well but, as expectations change, the standards of enforcement may need to change too. The central policy question has to do with how we create confident consumers. The responsibility must be shared between Government, business and consumers.
It is the Government’s role to ensure that the right balance is struck between protecting consumers—and especially the most vulnerable in our community, as the Minister rightly pointed out—and allowing business to trade without being handicapped by over-burdensome and often ill-considered regulation. The Government also have the responsibility to ensure open and competitive markets, in which business and consumers can operate. In addition, they should provide a legal framework that is clear, simple and easily understood, and put in place effective resolution and redress systems. Given the Government’s ambition to make Britain among the best consumer regimes by 2008, is the Minister still confident that they will fulfil this target, and how far have they progressed to date?
Business must also share in the responsibility. It is not, and should not be, the role of business alone to educate consumers, but I believe that it is clearly in the interests of reputable businesses to ensure that their customers are well educated and informed about their services and products. It is in their interest to be accessible to consumers, to make their offers clear and to be responsive to feedback and complaints. In fact, I would contend that that can be a source of genuine competitive advantage for businesses. The John Lewis Partnership, which was referred to earlier, is well known for its slogan, “Never knowingly undersold”. That means that its customers can be confident that it will not be beaten on price. Recent showings suggest that the partnership is offering something that is well received by some customers.
Sir Robert Smith: As in all things, if consumers are to be fully informed, they sometimes have to be careful. A company may be never knowingly undersold on the same product, but manufacturers produce many different models for different suppliers to allow a certain element of differential pricing for products that may not differ very much.
Mr. Prisk: All of which generously leads me on to my third point. I believe that consumers themselves have a personal responsibility to take informed decisions. It is not for the Government to protect consumers who took rash decisions when they were in
a position to have made an informed choice. It is right, in cases where information is available, to make a rational choice or decision, but consumers must face the consequences of their choice if they make it carelessly. In fact, if the truth be told, the distinction between Government, business and consumer may be partially false, for we are all consumers and we all have a responsibility to ensure that we are appropriately informed. The Government can, of course, help to ensure that the most vulnerable consumers are protected by clamping down on companies that use rogue practices. In the end, I still believe that the principle of caveat emptor should always remain the consumer’s motto.
Before I turn to the consultation that was mentioned earlier and deal with “consumer voice” and Consumer Direct, I would like to raise two specific issues with the Minister. First, he has had the pleasure of reading many papers this week, so he may be aware that we have been pressing for a national debate on the future of small shops. Promoting the health of our high streets is a classic example of how shared responsibility can work. It is the Government’s responsibility to ensure that there is a level playing field and that players within the market are not unfairly disadvantaged. That is why we welcome the Competition Commission’s inquiry into the grocery market, so long as it is thorough and comprehensive. I am pleased to say that I have had a direct assurance from the commission that that will be the case.
As the Minister and the House will know, allegations have been made of predatory pricing and unfair behaviour to suppliers. If they are proven, they must be exposed and dealt with properly. It is in the interest of retailers and consumers alike that those claims are investigated thoroughly because, in the end, if the final report produced after 18 months or two years is not trusted by the market, the danger is that we shall face calls for a fourth inquiry into the market. That would not be good for retailers, large or small, or for consumers.
Equally, in addition to the role of the Government and business, it is the responsibility of small independent retailers to respond to changing consumer demand and to seek out and develop the new market. Most of them already do, but there is a need to encourage firms constantly to seek to improve and not to assume that the Government can always protect them from open competition.
Consumers need to realise that they have a vital part to play in the shopping world. Many consumers rightly say that they value their small local shops. If they do, they have a responsibility towards them. After all, it is their spending power that can make the difference. They must recognise that if they genuinely value their local shops, they must use them. Indeed, that is one of the reasons why I have endorsed the excellent campaigns by the Evening Standard and, more recently, by Friends of the Earth, which have encouraged people to use their local shops more.
The second issue is the growing concern about instances of alleged chip and pin fraud. This week, we have heard that hundreds of customers at garage forecourts have had their details stolen as they paid for petrol using their chip cards and pin numbers. Those incidents highlight the need for customers to make sure
that they do not allow the advent of new technology to lull them into a false sense of security—as the Home Office knows, no IT system is completely foolproof. However, it is vital that consumers have confidence that the systems they use are generally secure. Given the clear public interest, will the Minister tell the House what action his Department is taking to establish the nature of the problem, what steps might be taken to minimise it and how the industry intends to maintain consumer confidence in what is after all a relatively new scheme? In particular, does he intend to meet APACS—the Association for Payment Clearing Services—to establish the facts? If not, I urge him to try to do so, although I appreciate that these are early days in his job.
I turn to some of the Government’s proposals to rationalise the process of consumer advice, advocacy and redress. In principle, there appear to be considerable benefits from such a move. However, there are a number of points on which we shall seek clarification and reassurance, not just today but as the legislation is debated and implemented. Indeed, the implementation timetable is one of the issues that concerns me.
The Government have set out a timetable for consumer voice to be established as a shadow body by November 2007—the Minister alluded to that earlier—and to take up its full responsibilities by January 2009. Significant changes of that nature cannot and should not be rushed, but I would welcome, either today or when he has had the chance to consider them carefully, the Minister’s views on the matter, especially on the measures that will be taken to avoid policy and management drift over what could be a three-year period as the existing system is phased out and the new one phased in. What arrangements will be made to ensure that staff are aware of the status of their employment so that they can concentrate properly on implementing the new scheme effectively? A distracted and unmotivated staff is in no one’s interests.
The Government hope that one result of a consolidated advocacy and redress system will be to deliver better value for money. Incidentally, I enjoyed the Minister’s vociferous starter for 100 at the beginning of his speech and I look forward to similar exchanges of a partisan nature. On a non-partisan point, however, can he give me an assurance that the attempt to seek better value for money is not actually a cost-cutting exercise, and that there will be no net reduction in the resources dedicated to consumer support?
As the Government contend in their document, the new joint association will be both large and powerful and will thus enhance the voice of the consumer in Government, which could prove helpful. However, there is a risk that other equally legitimate bodies could be marginalised in that policy development—for example, the Consumers Association and Citizens Advice, both of which are highly respected organisations. They have gained tremendous experience over the years and are trusted by the public. They perform a useful role and it will be important for the Government to make a clear commitment that such independent bodies are not crowded out by the Government’s new, substantial advocacy body.
What assurances can the Minister give me that the body will not prove overly dominant in both the advice and representation roles envisaged in the consultation document? Equally, it will be vital for the credibility of consumer voice that it is seen to be independent of, with the ability to dissent from, Government. Is the Minister satisfied that the structural arrangements proposed will provide that degree of impartiality and independence? The Government plan a range of options for the structure of consumer voice. Can the Minister give us an indication of their preferred option, and can he assure us that the views of all those consulted will be properly taken into account in reaching that conclusion?
I think that the Minister alluded to this in his remarks, so I suspect that he will accept that an effective enforcement and sanctions system is only one of the ways in which responsible business practice can be ensured. Given the earlier comments about the Hampton review and the need to target energy on enforcement, what action will the Government take to encourage suppliers to manage complaints effectively, as well as to impose sanctions when they do not? After all, I think that carrots often prove more effective than sticks.
I would also welcome the Minister’s views on how consumer emergencies will be handled. If a utility company, for example, fails to make urgent repairs, principal redress seems to lie in an ombudsman system and will very often occur some months after the event. Frankly, that is of little help to the people affected. Last year, Energywatch dealt with 280,000 such problems. Does the Minister, like me, understand that there is a possible danger that those consumers will be simply stranded by the proposed new system, which will work very differently from the current system?
Will the Minister offer further clarification about where responsibility for consumer education will lie? We touched on that issue earlier, when the hon. Member for Stroud (Mr. Drew), who is, sadly, not in his place now, asked a question about it in the context of the financial services sector. What will be the role of consumer voice, given the existing role of the Office of Fair Trading? In particular, how will consumer voice co-ordinate its new role in educating consumers, which is anticipated by the Government, with the OFT’s mandate to promote a “national consumer education strategy”?
Informed and empowered consumers benefit us all. They can use their knowledge and spending power to get what is best for them and their families, and they are better able to avoid fraudsters and conmen. They can encourage both producers and retailers to raise their standards and businesses to innovate and respond to their needs. Where consumers recognise the wider social value of, for example, a healthy high street, they can support good local shops, which very often form the focus of both our rural and our urban communities. That is why effective competition and consumer laws are important to a modern economy.
The Government have stated that their ambition is to create the best consumer regime by 2008. That is a good ambition, if it is tempered by a recognition that consumers’ rights must be balanced with responsibilities and, frankly,
that each of us—the Government, business and consumers—share those responsibilities. But effective consumer policy must also balance the rights of the consumer with a healthy attitude to vigorous but fair competition and a recognition that if we hamper business with unnecessary rules and regulations, none of our worthy ambitions can be realised.
I look forward to hearing from the Minister—whether at the end of the debate or in writing—on the points I have made, and I certainly look forward to what I can see will be a lively debate, as the Bill is developed and presented to the House.
3.18 pm
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): I, too, welcome the debate as a chance to take forward the issue of consumers and the important role that empowering consumers can play in helping not only the individual but the economy, business and the general well-being of society. Creating confident consumers clearly not only needs informed consumers and fair competition, but needs consumers to have the tools to make use of the information—the numeracy and literacy skills and the understanding of risk—because what goes wrong with many products and what causes many problems for consumers is that the person who is doing the selling can take advantage of their misunderstanding of the risk profile of what is being sold. A good consumer regime will benefit business and allow good businesses to thrive.
The Minister touched on the structure of the Department of Trade and Industry, and we still believe that a separate Department of consumer affairs would put the voice of the consumer very much at the heart of Government and separate out the Department’s responsibilities for advocating the needs of business and consumers. In reply to my intervention, the Minister said that he would write further on the subject of the consumer and trading standards agency, but if the agency is to be effective it must be effectively resourced, and it must be brought together in a way that ensures that the sum of the parts is greater than that of the individual organisations that make it up.
As the hon. Member for Hertford and Stortford (Mr. Prisk) has made clear, the Competition Commission’s welcome reinvestigation of supermarkets will help consumers by ensuring that there is a fair and level playing field for local shops. I reinforce the message that if the local shop is valued, it will be used. The shop will be there only if consumers are there to make use of it. Competition is one way in which consumers can benefit. The liberalisation of the car market and the opening up to competition of the sale of cars has improved the rights of consumers. They have benefited from price reductions and a more open market. Making sure that there is effective and open competition can often be the way to benefit consumers.
Consumers can also ensure the delivery of other concerns. A consumer’s decision is the sum of all sorts of different interests that they have when they go out to buy a product, such as the price and the benefit of the product to them. Consumers also quite often have a wider interest. The fair trade movement has shown that those who are concerned about the conditions of suppliers in less developed countries can influence
behaviour through their consumption. However, they need to be informed. The Minister should reconsider the Government’s decision to abandon the operating and financial review requirements of company law that would have forced companies to make sure that consumers had information on how they traded and operated. That would have meant that the market was more informed. As he recognises, informed consumers are able to make those decisions. If consumers do not have all the facts to enable them to assert their views, they will miss out.
I welcome the Consumer Direct approach, which means that the informed consumer knows where to go to access information to take up their case and to make their case more strongly. Clearly, that organisation is guiding many consumers to the right place to assert their rights. Many consumers are able to assert their own rights, but I am concerned about the “consumer voice” role. In certain specialist areas—particularly energy and the postal services—where complex nationalised monopolies have been regulated and privatised and complex markets are involved, we need to be careful about the loss of individual advocacy. The Government may want to reconsider to ensure that less informed consumers and vulnerable consumers, who cannot assert their own rights, do not lose out; I shall come back to the energy sector in that context. If consumers have to rely on an ombudsman scheme, they have to access that scheme. The great benefit of what Energywatch and Postwatch have done in the past is that they have taken up individual problems on behalf of consumers.
We need to look at the effectiveness of delivery in a wide area of consumer concerns. The telephone preference service assists people who face unwanted calls. People register with that service. However, what is being done to deliver what those people want? People still get the calls, and then they make a complaint. Some of the top companies have 1,800 complaints against them, but still have not faced a fine for breaking the rules of the telephone preference service. Clearly, consumers are trying to make use of a service to assert their rights, but the Information Commissioner needs more effective powers and resources to deliver what the consumer wants from the telephone preference service.
Mr. Prisk: Does the hon. Gentleman think that the problem is resources, or sanctions?
Sir Robert Smith: It is a mixture of both. The Information Commissioner’s department is snowed under with freedom of information inquiries, so he may well have a resource problem. If he had effective resources, he might be able to make use of the sanctions and fines. However, as fines have not been levied, he might need more powers to make it easier to impose sanctions.
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