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I have a worry about the regulation of financial services. There have been attempts to protect consumers from buying products that are not suitable, or do not deliver what is expected, and to ensure that consumers are informed. However, as financial products become more effectively regulated, it is possible to link them more imaginatively to products that are less regulated. Financial products for buy-to-let might be well regulated, but the information that a
person gets about the underlying property, such as its value and the likely expectations built into the product, might well be less regulated and effectively delivered.
As the world becomes ever more complex, it is important that regulators are able to see beyond the part of a product that they are regulating and examine the underlying substance of what is being sold to the consumer so that consumers can make informed and effective decisions. We could, as a nanny state, prevent people from making their own choices, but we should not do that. If people want to expose themselves to high-risk property speculation, they should be able to do so, but they should do that in an informed way, with the knowledge that the underlying product is at risk.
The Government have not only the role of enforcement and ensuring that the right regulations and systems are in place, but the fundamental role of setting an example through the way in which they deal with consumers. A classic example of the way in which the Government are setting a bad example is the Post Office card account. Consumers took out the account in good faith and the belief that it would be a permanent product. They did not know that behind the scenes the Department for Work and Pensions had always assumed that the accounts would come to an end in 2010. The Government preach to the private sector that they should treat customers in an open and transparent way, but they are setting a poor example.
The Minister talked about the danger of over-indebtedness. The Government need to understand that many people use the card account specifically to avoid the risk of over-indebtedness. Many such people have a bank account for savings, but choose to use the card account for their regular budgeting, in part because they know that they are at absolutely no risk of being exposed to charges, or £20 or £30 letters from the bank to tell them that they are overdrawn. The preferable option would be to keep the card account, but if the Government are not going to, they must ensure that there is a Post Office product in place that offers the same protection from indebtedness as the card account.
The Government could have given a lead to industry with the way in which they treated the ombudsman’s report on pensions. However, given the way in which they rejected the report quickly and summarily, what kind of example did they set to the wider industry on how it should respond to an ombudsman service, which is the Government’s preferred solution to ensure that there is effective dispute resolution?
Mr. Bone: The Minister made the case for ombudsmen very clear. He said that an ombudsman would protect vulnerable people because they would not have to pay for the service or abide by it. He said that the big organisation would have to pay for the service and be bound by the decision. That would be great, but it does not happen with the parliamentary ombudsman.
Sir Robert Smith: The Government seem to have two standards: one for business outside, and another for the way in which they act when consumers deal with Government Departments.
Experiences in the energy sector throw up various aspects of the way in which consumers can influence and make decisions. Everyone says that it is a no-brainer that consumers will benefit from improving the insulation of their houses, yet we still find it difficult to promote conservation and energy efficiency. Perhaps that is because consumers do not necessarily have confidence in, or information about, the product, or because they do not trust those selling it. One may have a good solution, but unless the market is well informed and consumers are confident, one cannot deliver it. The market may not be the only means of delivering measures such as energy efficiency. Building regulations and minimum standards set by the Government are still important in delivering good-quality products to the market.
As has been said, Energywatch offers an important advocacy service for individuals. It would be a great mistake, however, to assume that every individual has the skills and powers to make use of an ombudsman service. In the telecommunications sector, people must wait 12 weeks before being allowed access to the ombudsman, Otelo. If people are about to be cut off, that is far too long to wait to resolve the problem. Some of 87 per cent. of Energywatch’s cases are dealt with within seven weeks, but under an ombudsman scheme there would be an additional five-week wait before the resolution process even began.
It is extremely important that the Minister should look at the consultation to see whether the new regime can maintain an advocacy service for individuals and provide a more robust ombudsman scheme, following the initiative with Scottish and Southern Energy. If Energywatch receives a complaint from a consumer about Scottish and Southern, it works with the company to fast-track the complaint and refer it within two weeks. That is different from the traditional ombudsman’s role, but it is a much faster way of resolving disputes.
The role of citizens advice bureaux has been mentioned. The decoupling of the work on individual complaints from the role as a general advocate for the consumer could lead to a loss of touch with the coalface. Because Members of Parliament deal with individual cases, we can start to see patterns emerging. If we deal with a significant amount of Child Support Agency casework we realise that we cannot solve the problem by tackling the failure of bureaucracy—there is an underlying policy failure. Similarly, consumer advocates such as Energywatch, Postwatch and so on can build up a picture from the cases with which they deal and identify problems in the sector. They act as a general advocate, but their work is informed by individual experience. The Government must look at the way in which the consumer voice is heard so that the consumer experience is understood.
Mr. Prisk: Given the strong role that the Government anticipate for the consumer voice and the development of policy, is it not equally important to set out the role of citizens advice bureaux, the Consumers Association and others in any legislation that is introduced, so that their detailed experience and on-the-ground contact is not lost in policy development?
Sir Robert Smith: It is important to set out that role. If consumer voice informs policy making, it should not become a judge of its own advice. If it advocates a strategy that the Government take on board, but that strategy fails to deliver, it may not be the most effective advocate, given that its original advice will have been wrong. Someone who handles cases day to day will know whether the strategy is working, so their voice needs to be heard in the system. The Government must make sure that people who deal with individual cases have a strong voice that informs policy making. Finally, I welcome the concept of informed consumers as an important aspect of delivering fair competition and effective business. However, I reinforce my view that that cannot be delivered if we throw away effective advocacy for individuals who cannot pursue a case on their own.
3.34 pm
Mr. Peter Bone (Wellingborough) (Con): I draw the attention of the House to my declarations in the Register of Members’ Interests, particularly as a director of AJWB Travel Ltd.
It is a great pleasure to follow the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who made some powerful points. I shall deal with some that he did not mention. The debate is entitled “Creating Confident Consumers” and we could probably discuss such an enormous subject until midnight. Introducing the debate, the Minister had a go at the Conservative manifesto, when he said that we would drastically cut back the Department of Trade and Industry. As I understand it, unless he has changed his mind, the Department’s numbers are to be cut by 30 per cent. If we are trying to create confident consumers and increasing protection, will the Department have the resources to do it? Perhaps the Minister could deal with that when he winds up.
We speak of consumer confidence as though it applied only to the private sector. Of course, it is equally important in the public sector, and that has not been discussed today. Children are perhaps the most vulnerable consumers. They are consumers of education, and they have the right to be confident that they are safe where they are being taught, yet the Minister could not give me an assurance that all future schools would be protected by sprinkler systems. That would protect consumers and build confidence. One of the problems may be that the Government are prepared to undertake prevention, but not reaction. However, the topic may not be entirely germane to the debate.
Mr. McCartney: When you raised the point, I made it clear that the matter was out to consultation. I will read my remarks carefully, and if I have misled the hon. Gentleman I will write to him. I thought I had made it clear that we were trying to meet that point and were examining the matter.
Mr. Bone: I am grateful for the Minister’s clarification. I understand the point, but I also understand that if the Government introduce extra prevention, they propose to withdraw reaction by cutting back on the fire service. That concerns me, and I look forward to the outcome of the consultation.
The Minister also spoke of introducing legislation for the security industry to protect consumers, which I welcome. The problem is that the Government did not provide the resources or allow time to register people in the security industry, so for some months, the industry has been in flux. People who should be registered are not registered, and people who are acting illegally should be closed down. It is rather a mess. When consumer legislation is introduced, I urge that enough time should be allowed for the right regulation to be enforced and that it is not rushed through.
Creating confident consumers in the health service is particularly important. Back in November, the Prime Minister gave a guarantee to consumers of the health service that nobody would have to wait more than six months for an in-patient operation at an NHS hospital. The Government failed to meet that in November, December, January and February. The number of people waiting more than six months is growing.
If we are to create consumer confidence in the NHS, should there not be some quick remedy for those who wait more than six months, when there is a guarantee—not a target or an aspiration, but a guarantee—that they will not have to wait more than six months? Should there not be a method whereby they can be transferred to another hospital for an immediate operation, given compensation or treated in the private sector? If we expect companies in the private sector to meet all the regulations, why do we not expect the Government to do so?
The hon. Member for West Aberdeenshire and Kincardine spoke about citizens advice bureaux. I am told by citizens advice bureaux in my constituency—I expect hon. Members across the country hear the same comments—that they are dealing with more and more debt management problems. Unfortunately, some of those are coming about because vulnerable people have been given tax credits, have found that they have been overpaid and are being asked to pay back thousands of pounds. I have had people in my constituency office in tears, saying, “I can’t possibly meet these bills—what are my options? Am I going to go bankrupt? I can’t sleep. My marriage is on the line.” Those problems are being sorted out by local citizens advice bureaux. I was horrified to learn that no Government money goes directly to them, but only to the national organisation. If the Minister wants to improve debt management, and I think that he genuinely does, I am not sure that creating a semi-state advice centre is the way forward. That money should be given directly to local citizens advice bureaux, which have the great advantage of being seen to be completely independent of the state and of business, and will give impartial advice. That would represent a change in attitude from the Government, who always seem to think that they can impose from the top, whereas this would be a great solution from the bottom upwards.
The Minister is right to say that ombudsmen have a significant role to play in protecting vulnerable people if the banks do someone wrong, as they often do. The process may be lengthy and frustrating, but it does not cost anything, and ultimately the bank is bound by it but the person is not—they can still challenge the ombudsman’s decision through the court if they are not happy with it.
I fail to see why the Government cannot accept that principle when it comes to themselves. They are the only organisation—the most powerful organisation in the land—who, when they are found guilty of maladministration, say, “Sorry, but we don’t agree; we’re not guilty” I am sure that half the time banks do not think that they are guilty of maladministration, but they still have to pay up. If the Minister could go back and say, “We’ve been unfair to these pensioners,” I think that the country would say, “This Labour Government are beginning to listen.” However, I fear that that will not happen.
I should like to talk mainly about the travel industry, which I have been involved in for several years. When it first developed, many years ago, people had to pay a fortune to go abroad, and only the rich travelled. Then came the invention of the package holiday, Freddie Laker and the Association of British Travel Agents. People went into their local travel agent, looked at brochures, and picked a holiday. If the holiday company went bust, they were covered either by ABTA or the ATOL—air travel organiser’s licence—system. Everybody had consumer confidence, and in a highly competitive industry, no consumer ever lost out.
Now, the travel industry has moved on. People do not necessarily go to their local travel agent because they are able to book online or by telephone. A system called dynamic packaging has been introduced, whereby people do not book a package holiday but book the airline, hotel and car separately. It is also called split contracting. The problem with that system is that if any provider of the travel arrangements goes bust, the consumer is most unlikely to be covered by protection. If they have booked online, they are not covered in any form whatsoever. They will have an element of protection if they happen to have paid by credit card, but most people do not like to do that because they have to pay a fee on top of the cost of the holiday. If a major low-cost airline were to go bust, many thousands of people would lose out.
The waters have been muddied even further by the European Union. There is an EU directive on travel that is so incomprehensible that I am sure that the Department of Trade and Industry does not understand it, let alone local travel agents and consumers. All the EU has done is confuse matters. People could book a holiday to America on an American airline, which might fly under chapter 11 protection. In other words, it might be bankrupt. Many consumers in this country are likely, sooner or later, to lose a great deal of money. I fear that the Government will be blamed for sitting on their hands.
The travel industry has welcomed a proposal to charge a levy of £1 on every ticket, thus building up a fund. Every consumer would then be covered. It is a simple solution that does not require all sorts of bonding or ATOLs. People would be covered whether they booked through an ABTA agency or online. Such consumer protection would give people great confidence. I urge the Minister to consider that because the travel industry is highly competitive and produces great value for money. In the past, when big firms have gone bust, all consumers have been protected. I fear that, although we still have the highly competitive industry, we also have difficult times because of higher
fuel costs and the possibility of booking with airlines that fly under bankruptcy protection, and consumers could lose a lot of money.
I appreciate that the Government’s heart is in creating confident consumers, but I sometimes worry about their methods.
Sir Robert Smith: I am listening to the hon. Gentleman’s careful analysis. I wonder whether a different Department will relate to the consumer on the matter that he is considering. Does he agree that the Government need to work across Departments to get their values across for dealing with consumers in all sectors?
Mr. Bone: That is a valid point. The attraction of the proposal that I mentioned is that it is simple and straightforward.
The Government often set out to do things but create so many regulations and complicate matters to such an extent that no one is genuinely protected and the industry is burdened with huge costs. In the case that I am considering, the industry would not be burdened with such costs and the consumer would be protected. That would be a good way forward in creating confident consumers in the travel industry.
3.47 pm
Tony Lloyd (Manchester, Central) (Lab): First, I apologise to you, Mr. Deputy Speaker, and to my right hon. Friend the Minister for missing part of the opening speech.
The debate is important and well informed, and there is a measure of agreement between all parties on some of the issues. I want to speak about the role of information in creating confident consumers and mechanisms for protecting them. I also want to speak about my trade union interests and those who supply the consumer with information. Consumers can be confident only if those who serve them are well trained and motivated.
It is obvious that consumers need access to adequate information to be confident. In several services that we all use—for example, financial services— such information is not available. Most of us are used to the plethora of credit card letters on our doorstep every morning that offer us many different deals, structures and so on. That does not inform consumers, it simply bewilders them. One of the problems with financial services is that although we have a system of necessary regulation, we have no system of standardising the important parts of product information. I hope that my right hon. Friend, as Minister responsible, will consider the matter. The Treasury Committee recommended that in one of its most recent reports and I strongly endorse the recommendation.
Let us consider food provision. We have perhaps become a more cranky and individualistic society in many ways. That is healthy, and what consumers should do when there is choice. We have taken huge steps forward on food labelling, some of which have been absolutely vital. Some of my children have specific allergies, and they need the protection that
proper labelling can provide. One of my daughters has an allergy to corn, for example, and it is important for her to know when a particular food product contains corn. We have made advances in the provision of information on food products, but we have not yet gone far enough to give consumers the confidence to make these choices. There may be personal moral choices involved—for vegetarians, for example—or health choices.
I urge my right hon. Friend the Minister to consider one particular anomaly in the food production system. It is perhaps a difficult question, but it is worth examining. It involves the big gap that now exists between the producers of food sold through shops and those who produce for the restaurant or café trade. Food labelling in restaurants and cafés is still virtually non-existent, and we need to look at that issue if we are to offer adequate protection to the public.
I agree with the points made by Opposition Members about what we should be looking for in our systems of regulation. It worries me that our big utilities are quite resistant to the consumer. I have experienced this myself; my right hon. Friend the Minister, who is also a north-western MP, will know—I say this perhaps a little unfairly—that it is not always a joy and a pleasure to try to get through the almost impenetrable wall in order to deal with United Utilities. That can be difficult even for a Member of Parliament, and it is often much more difficult for someone who genuinely has a leak in their water supply. The same arguments apply to the other utilities and energy industries.
I have a great deal of sympathy with the points made by Opposition Members on the role of Energywatch. When we change the way in which we protect consumers, we must be careful not to throw away the advantage of the personal service that Energywatch has provided. We must recognise that we need that type of direct advocacy service when dealing with the large utilities. Perhaps we can manage to retain that, with Consumer Direct as well. It should not be impossible to ensure the continuation of the good work that Energywatch has done in the past.
In some industries, regulation is not yet up to speed. Legal services have been mentioned in that regard. I have never been a great fan of the Law Society being the regulator of solicitors when complaints are made against them. We need to look at how we regulate in such services. Fortunately, most of us use them only rarely, but it can be very stressful for people when things do go wrong. I am sure that all Members of Parliament have had that experience.
Many years ago, I had a fairly detailed knowledge of the building trade. I know that it still contains those who glory in the title of the cowboy builder and, alas, from time to time, my constituents come face to face with these people. It is difficult to determine how much and what kind of regulation we should have in such industries, and I am prepared to accept that sometimes the most appropriate regulation can be provided from within the industry. However, those services are not comprehensively regulated at the moment.
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