House of Commons - Explanatory Note
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Clause 56: Grounds for warning orders

171.     In the same way that clause 55 widens the circumstances in which the OFT can consider whether a person is fit to engage in estate agency work, potentially leading to a prohibition order, this clause widens the circumstances in which the OFT can consider issuing a warning order to an estate agent under section 4(1) of the 1979 Act. Section 4(1) currently provides that a warning order may be issued where a person carrying on estate agency work has failed to comply with an obligation imposed on him under sections 15 or 18 to 21, or has engaged in an undesirable practice as mentioned in section 3(1)(d), and were he again to fail to comply with such an obligation or continue to engage in that practice the OFT would issue a prohibition order against him. Subsection (2) of the clause extends the circumstances in which warning orders may be issued to include engaging in estate agency work in breach of a duty to belong to a redress scheme, failure to comply with any requirement imposed under sections 9(1) or 11(1A)(b) and breach of a statutory undertaking or an enforcement order under the Enterprise Act 2002.

172.      Subsections (3) to (5) contain consequential amendments to section 4 as a result of the inclusion of the new subsection (1).

Investigatory powers

Clause 57: Powers of entry and inspection

173.     This clause widens the powers of entry under the 1979 Act. At present, under section 11 of the 1979 Act, enforcement officers have the power to enter premises when they have reasonable cause to suspect that an offence has been committed. This clause extends the power so that enforcement officers can enter premises not only when there is reasonable cause to suspect that an offence has been committed but also where the enforcement officer has reasonable cause to suspect that a breach of the obligations listed under subsection (1)(b) of section 11 (as amended), or an undesirable practice, has occurred. The power is to be used to establish whether the specified breach or undesirable practice has occurred.

174.     New subsection (1A) sets out the powers which are for the enforcement officer to enter premises, to request anyone connected with the business to provide him/her with any books or documents (including requesting that documents held on a computer related to the business be produced in a legible form) and to make copies of any books, or documents provided. This re-enacts with minor amendments the provision currently made by section 11(1)(b).

175.     New subsection (1B) allows an officer to seize and detain the originals of any books or documents provided they may be required as evidence for use in proceedings that might follow. This replaces the current power in section 11(1)(c) to seize and detain documents and widens the circumstances in which the power is exercisable. In addition, subsection (1C) allows an enforcement officer to seize and detain a book or document where it is not possible to take a copy of it or of an entry in it. These subsections are qualified by the new subsections (1D), (1E) and (1F), as well as subsections (2) and (3) of section 11.

176.     Subsection (3) further amends section 11. Section 11(4), currently only allows a warrant to be issued when there are grounds to believe that an offence has been or is being or is about to be committed or that there is documentary evidence on the premises that is likely to reveal that an offence has been committed, and that admission to the premises has been or is likely to be refused or that giving notice would defeat the object of the entry. The new subsections (4), (4A) and (4B) are wider and, in addition to the existing circumstances under section 11, allow a warrant to be issued if there is reason to believe that an estate agent has breached any of the obligations under the Act specified in subsection (4A)(a), or has engaged in an undesirable practice. At least one of the conditions in subsection (4B) must also be satisfied for a warrant to be granted.

Clause 58: Failure to produce information

177.     This clause provides a new power where a person has failed to provide to the OFT (under section 9 (1) of the 1979 Act) or to an enforcement officer (under section 11(1A)(b)) information, books or documents that have been required to be produced. The OFT or the enforcement officer can apply for a court order to require the "defaulter" to produce the information, books or documents asked for, or to take such other steps as may be specified in the order. This clause also makes consequential amendments to section 9 and section 27 of the 1979 Act

Part 4: Miscellaneous and General

Clause 59: Contracts concluded away from business premises

178.     This clause enables the Secretary of State to make regulations which give consumers the right to cancel contracts concluded in their home or at their workplace with a trader whom they invited to visit them there. Consumers already have rights to cancel contracts where the trader's visit was unsolicited 10. This power is expected to be used to make a single set of new Regulations which incorporate the provisions in the existing Regulations and so cover all contracts concluded by consumers with traders in the consumer's home or workplace. The Secretary of State will set out the criteria for the "solicited" contracts to which these rights will apply in the relevant statutory instrument.

10 1987 No 2117 Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations.

Clause 60: Orders and Regulations

179.     Clause 60 makes provision in relation to orders and regulations made under the Act. Any power to make orders or regulations under the Act is exercisable by statutory instrument.

180.     An order or regulations under the Bill may also include incidental, supplementary, consequential, transitory, transitional provisions and savings.

181.     Such provisions may make amendments to legislation including Acts of the Scottish Parliament and a Measure or Act of the National Assembly for Wales. Subsection (7) provides that clause 60 does not authorise an order or regulations under the Bill to make any provision which is within the legislative competence of the Scottish Parliament. The effect of this is that no provision which is made by virtue of clause 60 may be made in relation to devolved matters. Subsection (7) does not prevent an order under the Bill amending ASPs for reserved purposes

Clause 62: Parliamentary control of orders and regulation

182.     This clause makes provision in relation to the Parliamentary procedure which applies to orders and regulations made by the Secretary of State under the Bill.

183.     Regulations made by the Gas and Electricity Markets Authority or the Postal Services Commission under clauses 43 and 46 are not subject to any Parliament procedure. However regulations under clause 43 are subject to the consent of the Secretary of State by virtue of clause 43(4).

Clause 63: Minor, consequential and transitional provision

184.     This clause provides a power to make such incidental, supplementary, consequential, transitory, and transitional provisions and savings as the Secretary of State considers necessary or expedient in relation to the commencement of the provisions of the Bill. However, such a measure may not make any provision which is within the legislative competence of the Scottish Parliament (subsection (5)).

Clause 64: Repeals

185.     Clause 64 gives effect to Schedule 8 which repeals certain provisions in existing legislation.

Clause 65: Extent

186.     Clause 65 provides that in general the Bill applies to England, Wales, Scotland and Northern Ireland. However, certain provisions apply only to certain parts of the UK.

Schedule 1: The National Consumer Council

187.     This Schedule makes further provision in relation to appointments to the Council, its members, procedures, status and funding.

Part 1: Members of the Council

Membership

188.     Paragraph 1 provides for the Secretary of State to appoint the chairman of the Council, the chairmen of the territorial committees, and other members. The Council chairman is non-executive (i.e. not appointed from the staff of the Council), and must be consulted by the Secretary of State before the latter appoints other non-executive members to the Council. Executive members of the Council (i.e. Council members who are appointed from the staff of the Council) are appointed by the Secretary of State on the nomination of the Council chairman. The Secretary of State may appoint as non-executive members persons who are members of the OFCOM Consumer Panel and/or the Financial Services Consumer Panel where these persons have been nominated by the Panel in question following consultation with the Council Chairman. The Secretary of State is obliged to secure that a majority of members of the Council are non-executive. In making appointments to the Council, this paragraph provides that the Secretary of State must have regard to the desirability of appointing one or more members with experience of work among and the special needs of disabled persons.

189.     Paragraph 2, subject to the other provisions of Schedule 1, establishes that members of the Council will be appointed to, and vacate, their office according to the terms and conditions of their appointment.

190.     Paragraph 3 enables the Council to make payments in relation to non-executive members' remuneration, pensions, allowances or gratuities. The Council may also pay travelling and other allowances to any member.

191.     Paragraph 4 defines the term of a non-executive appointment as a fixed period not exceeding five years, and permits re-appointment for one further period of up to five years.

192.     Paragraph 5 describes circumstances where individuals will cease to be members of the Council. The Secretary of State is empowered to terminate the appointment of a chairman or other member who is unable, unfit, or unwilling to fulfil the functions of his or her appointment.

193.     Paragraph 6 enables the Council to pay compensation to members who leave office early.

Part 2: Staff of the Council

194.     Paragraph 7 requires the Council to employ a Chief Executive, and the first such appointment is to be made by the Secretary of State on such terms and conditions as he determines. Subsequent appointments of Chief Executives are to be made by the Council, with the approval of the Secretary of State being required for both the appointment and for the terms and conditions on which the appointment is made.

195.     Paragraph 8 enables the Council to employ other staff as it considers appropriate, with the numbers of staff and their terms and conditions subject to approval by the Secretary of State.

196.     Paragraph 9 makes provision to allow the Chief Executive and staff of the Council to join the Principal Civil Service Pension Scheme and for payments to be made by the Council in respect of this pension provision.

197.     Paragraph 10 provides that the Council may arrange for other parties to provide it with assistance, and to pay fees to such parties.

Part 3: Territorial, Regional and Other Committees

198.     Paragraph 11 sets out the arrangements for territorial committees, which the Council is required to establish by clause 1(2) for Scotland, Wales, and Northern Ireland. Each committee comprises executive and non-executive members appointed by the Secretary of State, with a majority of non-executive members. The Chairman of each committee must be a non-executive member. Before appointing a non-executive member (including a chairman), the Secretary of State must consult the Council chairman, and Scottish and Welsh Ministers as appropriate.

199.     Paragraph 12 enables the Council, with the approval of the Secretary of State, to establish or abolish regional committees to provide advice and information to the Council about consumer matters affecting the relevant region, and for other purposes determined by the Council.

200.     Paragraph 13 specifies that the Council is able to appoint a chairman and members to a regional committee. The chairman and the majority of members must be non-executive. The Council must have regard to the desirability of appointing one or more members with experience of work among, and the special needs of, disabled persons.

201.     Paragraph 14 enables the Council to establish other committees.

202.     Paragraph 18 limits the term of a non-executive appointment to a territorial or regional committee to a fixed period not exceeding five years, and permits re-appointment for one further period of up to five years.

203.     Paragraph 19 makes provision in respect of the circumstances in which the chairmen of a territorial or regional committee shall cease to be a member of the committee. The Secretary of State is empowered to terminate the appointment of a chairman or other member of a territorial committee who is unable, unfit, or unwilling to fulfil the functions of his or her appointment.

204.     Paragraph 20 enables the Council to pay compensation to members of territorial committees when they leave office early.

Part 4: Procedure etc.

205.     Paragraph 21 enables the Council to regulate its own procedure and that of its committees and sub-committees, including the quorum in each case.

206.     Paragraph 22 determines that the validity of any act of the Council is not affected by any vacancy on the Council, its committees or sub-committees; any defect in the appointment of any members of the Council or its committees or sub-committees, or any disqualification of any person as chairman or other member of the Council.

207.     Paragraph 23(1) enables the Council to delegate its functions to the Chairman or another member of the Council, any committee or sub-committee of the Council, or the Chief Executive or another member of staff. Paragraph 23(2) provides that any committee established by the Council has a similar power to delegate its functions.

208.     Paragraphs 24 to 26 make provision in relation to the authentication of Council's seal and the execution of documents by the Council.

209.     Paragraph 27 requires the Council to maintain an office in each of England, Scotland, Wales and Northern Ireland, and authorises the Council to establish additional offices within the United Kingdom with the consent of the Secretary of State.

Part 5: Funding and accounts

210.     Part 5 sets out how the Council will be funded, and the requirements to be placed on the Council in relation to its accounts.

211.     Paragraph 29 inserts additional provisions in the Utilities Act 2000 which provide that licensed electricity and gas suppliers may be required to pay for:

a)     the appropriate proportion of the expenses of the Council (including a proportion of the establishment costs);

b)     the appropriate proportion of the costs of the Secretary of State in relation to the establishment of the Council;

c)     any transfer schemes made under section 35(2)(a) or 35(7) of the Bill in respect of energywatch to the Council;

d)     the costs of the Secretary of State in relation to the abolition of energywatch,

e)     the costs of the OFT in relation to the expansion of any public consumer advice scheme supported by the OFT ("OFT scheme") to enable it to cater for enquiries from electricity and gas consumers;

f)     the appropriate proportion of the costs of the Office of Fair Trading in relation to the operation of an OFT scheme.

212.     In determining the "appropriate proportion" of the funding to come from energy licensees, the Secretary of State must have regard to the functions exercised by the Council or an OFT scheme in relation to electricity and gas consumers.

213.     Paragraph 30 inserts a new provision into the Postal Services Act 2000 which provides that licensed suppliers of postal services may be required to pay for:

a)     the appropriate proportion of the expenses of the Council (including a proportion of the establishment costs);

b)     the appropriate proportion of the costs of the Secretary of State in relation to the establishment of the Council;

c)     any transfer schemes made under section 35(2)(a) or 35(7) of the Bill in respect of Postwatch to the Council;

d)     the costs of the Secretary of State in relation to the abolition of Postwatch;

e)     the costs of the OFT in relation to the expansion of any public consumer advice scheme supported by the OFT ("OFT scheme") to enable it to cater for enquiries from postal services consumers;

f)     the appropriate proportion of the costs of the Office of Fair Trading in relation to the operation of an OFT scheme.

214.     In determining the "appropriate proportion" of the funding to come from postal services licensees, the Secretary of State must have regard to the functions exercised by the Council or the OFT scheme in relation to postal services consumers.

215.     Paragraph 32 sets out the requirements on the Council in relation to its accounts, including the requirement for the Comptroller and Auditor General (the head of the National Audit Office) to audit the Council's accounts annually, and to lay each year's accounts before Parliament.

Part 6: Status etc.

216.     Paragraph 33 provides that the Council is not to be regarded as a servant or agent of the Crown; it does not enjoy any status, immunity of privilege of the Crown; and the Council's property is not Crown property.

217.     Paragraphs 3 to 37 make the Council subject to the requirements of the Parliamentary Commissioner Act 1967 (c. 13) relating to departments subject to investigation; the House of Commons Disqualification Act 1975 (c. 24) and similar provisions barring members of the Council from being members of the House of Commons, or of the Northern Ireland Assembly. It also makes the Council subject to the provisions of the Public Records Act 1958 (c.51) and the Freedom of Information Act 2000 (c. 36).

218.     Paragraph 38 provides an exemption from liability for damages for anything done by the Council, any member of the Council or any of its committees or sub-committees, the Chief Executive or any member of the Council's staff in the exercise (or purported exercise) of the Council's functions. This exemption does not apply where the act or omission was in bad faith. Nor does it prevent an award of damages made in respect of an act or omission which is unlawful a result of section 6(1) of the Human Rights Act 1998 (c. 42).

Schedule 2: Enforcement of information requirements

219.     Schedule 2 amends the Gas Act 1986, the Electricity Act 1989 and the Postal Services Act 2000 in order to make provision in relation to the enforcement of the requirement on licensed suppliers to comply with a direction (under clause 24) by a "designated investigator" to provide information to the Council.

220.     The enforcement provisions by virtue of this Schedule operate in the same way as those in respect of Part 2 of the Bill. Hence, the relevant regulator may impose an order for breach of the above requirements. The supplier is obliged to comply with such an order and breach of the order can be enforced in the civil courts. Breach of such an order may also render the supplier liable to pay damages to any person who has suffered loss as the result of that breach. In addition to the above, legislation concerning the relevant sector permits the regulator to impose a financial penalty for breach of the above requirements.

Schedule 3: Abolition of consumer bodies: transitional provision

221.     This Schedule sets out the transitional arrangements that will apply when energywatch and Postwatch are abolished and the new Council is set up.

222.     Paragraphs 1 and 2 make provision to ensure that the Council is able to continue to investigate any complaint that energywatch is in the process of investigating at the time of its abolition.

223.     Paragraph 3 makes transitional provision in relation to energywatch's final annual report.

224.     Paragraph 4 makes provision to ensure that the Council is able to continue to investigate any complaint that Postwatch is in the process of investigating at the time of its abolition.

225.     Paragraph 5 makes transitional provision in relation to Postwatch's final annual report.

Schedule 4: Transfer of property etc to Council

226.     This Schedule makes further provision about transfer schemes made by the Secretary of State under clause 35(7) or by energywatch, Postwatch, the Consumer Council for Water or the existing National Consumer Council under clause 35(2)(a). Paragraph 5 means that all property, rights and liabilities included within a transfer scheme are transferred to the Council on the day appointed by the scheme, even if other provisions exist that might prevent or restrict their transfer.

227.     Paragraph 6 means that anything done by the body from who the property etc is being transferred (the "transferor") in connection with the property etc being transferred, shall be treated as if it were done by the Council. The Council may continue anything that the transferor was in the process of doing before the transfer, and should be substituted for the transferor in any document that relates to the property etc being transferred.

228.     Paragraphs 7 and 8 apply the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246) to any transfer that relates to rights or liabilities under a contract of employment. Paragraph 8 ensures that there is no break in the continuity of employment of staff transferring to the Council from energywatch, Postwatch, the Consumer Council for Water or the existing National Consumer Council.

229.     Paragraphs 9 to 11 make provision for corporation tax consequences of the transfer schemes. The effect is to remove tax consequences that would otherwise have arisen only because of the transfer and to provide continuity of tax treatment.

Schedule 5: Information relating to compliance with complaint handling standards

230.     This Schedule amends the Electricity Act 1989, Gas Act 1986 and Postal Services Act 2000 to require the Gas and Electricity Markets Authority and the Postal Services Commission to collect information from licence holders in respect of levels of compliance with any complaint handling standards prescribed by these regulators under clause 43 of the Bill. The above regulators are given the power to direct licensees to provide them with the above information.

Schedule 6: Estate Agents' Redress Schemes

231.     This is explained above.

Schedule 7: Minor and Consequential Amendments

232.     This Schedule makes a number of consequential amendments to legislation.

Schedule 8: Repeals

233.     Schedule 8 lists the repeals made by the Act.

FINANCIAL EFFECTS OF THE BILL

234.     The Bill is not expected to entail any additional net public expenditure. It is envisaged that the current level of Government funding from the Consolidated Fund to the existing National Consumer Council will be transferred on abolition to the new National Consumer Council. The new body will need to negotiate its annual funding requirement with the DTI, just as the National Consumer Council does currently. This funding will be to pay for the body's functions in relation to consumers in all sectors other than the energy and postal services sectors (or the water sector if the Consumer Council for Water is consolidated into the new body after consultation in 2008).

235.     The remaining on-going funding requirement of the Council will come from the energy and postal services industries initially, again through licence fees. The Bill will also confer a power to require providers in the gas, electricity and postal services sectors to contribute towards the costs of establishing the Council. The power to require providers in the water sector to contribute towards the costs of the Council may only be exercised after the Consumer Council for Water has been designated for abolition. In view of this, providers in the water sector cannot be required to contribute towards the Council's establishment costs. Providers in the above sectors will also contribute towards the costs of expanding and running the consumer advice service supported by the OFT (Consumer Direct) in relation to their sectors. These funding requirements will be imposed via licence fees (and also conditions of establishment in the water sector) and collected from providers by the sectoral regulators who will pay the sums collected by them into the Consolidated Fund. The Council will then receive its funding from government as grant-in-aid.

236.     The Bill will also enable the Secretary of State to establish redress schemes himself if industry has not already done so in the electricity, gas and postal services sectors (and potentially the water sector after consultation in 2008). This may require some public expenditure although any costs would be recouped from the members of the scheme through the schemes membership and case fees. Powers have been provided in the Bill to fund such schemes. However, it is expected that industry will establish its own redress schemes and it is therefore unlikely that the Secretary of State will need to exercise his power to establish a redress scheme.

 
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Prepared: 8 February 2007