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“believes that the existing measures that energy suppliers have in place to manage complaints are sufficient”.
There is complacency among suppliers and pleasure in getting the new structure, because they believe that it will finally get that nuisance called Energywatch off their backs.
I understand the importance of having a code of conduct as part of becoming a member of a redress scheme, which would require energy suppliers and any other providers to have a proper complaints resolution scheme in place. All that will be important, and I hope that it can be strengthened in Committee, but I make the following point to the Minister: the new national consumer council should have the powers, and if necessary be assured that it could get the resources, to step back into the advocacy role if the new scheme does not provide the level of service and the resolution that customers have finally begun to achieve after many years of not being able to get their complaints appropriately dealt with. It seems that that is a relatively risky new step. We are taking a chance that the providers, the energy suppliers and others will step up to the level of service that they have been prodded into by groups such as Energywatch and Postwatch. There should be a plan B for dealing with the situation if that is not accomplished.
I am also concerned about businesses. I know that the Minister in the other place gave an assurance that the definition of customers includes businesses. Obviously, in the past the various watchdog bodies have had a specific specialised focus on small businesses. The Minister will be aware that the Federation of Small Businesses is concerned that that same focus may not be shared by the new NCC. Indeed, there is a lack of clarity about the focus of the new NCC, what its culture will be, how intensively it will chase down different issues, and how it will manage its priorities. There is little discussion about that, other than our being told “Trust me” that those who are in charge—Lord Whitty and others—are people of integrity and will do a good job. That is not an adequate answer.
Could we at least get some clarity on the funding of the NCC? Historically, the energy supply industry has provided the funding for the energy watchdog, and the Post Office for Postwatch. That money is now to be merged into the new NCC, and the Department of Trade and Industry has arranged for the funds to be provided to the NCC itself. However, it is unclear whether that will continue to be the arrangement over the long term, particularly if the NCC decides to focus
much of its energies outside the traditional sectors. We must have some clarity about that.
In terms of the publishing of reports, consumer confidence will be essential. Information must be made available to the public. That is the case not only because the taxpayer will largely have paid for the reports, but because the idea that an issue that affects consumers should be kept away from consumers, and that reports that might reveal areas of concern should not be fully disclosed, is completely unacceptable in this day and age. The public disclosure of all reports is essential.
I now turn to measures to do with estate agents, which account for a major proportion of the Bill. We welcome the proposals to require estate agents to join a redress scheme and to keep the necessary records, and many of the other innovations that the Bill would introduce. The proposals are not particularly radical, but they represent an improvement on the situation in the past. However, I wish to raise again the concern about the idea of multiple ombudsman schemes; there is a fear that the industry will tend to head for the body that will give it the easiest time, and there could be a race to the bottom.
Mr. Mark Prisk (Hertford and Stortford) (Con): Does the hon. Lady not agree that what matters is the standards that must be applied to such schemes, and that if there is a common set of standards, whether there are two or three redress or ombudsman schemes is, frankly, neither here nor there?
Susan Kramer: I hope that a multiple scheme system would operate like that, but I am concerned. Because the schemes will make their money from the number of customers they attract, when so much is a matter of interpretation and so many issues are subjective there will be a great temptation to weaken schemes, rather than to strengthen them.
The Minister has spoken about one of our most fundamental concerns—the fact that the Bill does not cover the lettings industry, which is worth £12 billion. Although he implied that that would be dealt with in a sort of phase 2, I ask that some work be done now so that at least the principle of including lettings is added to the Bill. Delay in such an area would be unfair to consumers. The hon. Member for Rutland and Melton made the point that people who rent are more likely than those who buy to be vulnerable and to have difficulties in taking on the system; that underscores the importance of getting action on lettings.
Shelter conducted an interesting case study that showed that some people were charged as much as £300 in fees for the simplest lettings processes, which is completely out of kilter with the amount of work involved. The Bill would give no opportunity for redress in such circumstances. I do not understand, either, why the definition of what is an estate agent or what is estate agency work cannot be adapted to include developers who sell their own properties, whether they sell them off-plan or after they have been built. That is a huge loophole.
As was mentioned often by those who spoke on behalf of my party in the other place, it is completely unacceptable to have a maximum penalty of only
£1,000 for operating outside the scheme. We recognise that that has been increased from £500, but we will continue to seek an upward adjustment. The average estate agency commission on a single sale is more than £3,000; that should be the minimum fine for a first offence, rising to a far higher sum if there are future offences. We have suggested the sum of £10,000, which, interestingly, I also heard being suggested today.
The redress scheme does not include any capacity to monitor what is going on in the industry. That will continue to be the responsibility of consumers at large, Which? or the BBC. That raises in my mind questions about the Government’s approach to having negative licensing, rather than positive as well as negative licensing. The fact that almost anyone can set up as an estate agent without a single qualification for the job is to me, and I believe, to most consumers—both purchasers and sellers—completely unacceptable.
Consumer dissatisfaction with estate agents is high. The Office of Fair Trading report, having first said that nine out of 10 people buying or selling a home used an estate agent, goes on to say that around a quarter of them were dissatisfied—a high level of dissatisfaction. However, few of those people made a formal complaint to the OFT. That is a difficult and challenging process and people do not have the time to do it. They want to get the business over and done with. The industry does not have many fans. It has done its own research and found that only one person in 10 thought that one could usually trust an estate agent.
In 2005 the voluntary ombudsman scheme, to which only two thirds of agents belong, received a whopping 6,000 complaints. Anyone who saw BBC1’s “Whistleblower” programme in March 2006 will have heard about a whole culture of dirty tricks. For most people a house purchase is the largest investment they will ever make. For many it is their retirement nest egg, and a purchase that they will make very few times in their lives. Many people make a purchase in a new part of the country, in an area that they do not know and where they have few points of reference. In such circumstances no one would dream of using an unqualified solicitor and expecting them to provide the necessary paperwork for a house purchase. However, we do expect people to employ a possibly unqualified estate agent, and that seems unacceptable to me.
A redress scheme is all well and good, but surely it would be better to prevent the problem with proper training and qualifications for estate agents. Indeed, the National Association of Estate Agents and Which?—two different sides of the coin—both support that approach. We would not need to invent the qualifications as there is an NVQ level 3, introduced three years ago, which would be an adequate qualification. I mentioned the Earl of Caithness at the beginning of my speech, but his small attempt to amend section 22 of the Estate Agents Act 1979, which sets out standards of competence for estate agents, was defeated.
I lived for many years in the US, where every estate agent has to be licensed. It is not a barrier to competition, but having bought and sold houses in both countries, I can say that the level of service available in the US, where I had a qualified and licensed agent, was a world away from the quality of service in the UK. I hear similar reports from almost
everybody to whom I talk. Therefore, I ask the Government to reconsider that issue.
I hope that, as they have suggested, the Government have an open mind on many of the potential improvements that could be made to the Bill. We all want quality protection for consumers. None of us wants to waste money, but bad practice is costly to the consumer, the economy and the taxpayer. Let us not make a false economy. I hope that in the next phases of the Bill’s passage we can add many provisions that will strengthen consumer protection and make it more effective.
5.48 pm
Dr. Desmond Turner (Brighton, Kemptown) (Lab): I shall be brief. I welcome the Bill. It will greatly strengthen consumer protection and make it more transparent and accessible to the public, which is devoutly to be welcomed. However, an opportunity is being missed. This Bill is a useful legislative vehicle of a kind, as the hon. Member for Rutland and Melton (Alan Duncan) pointed out, that does not come along very often—perhaps every 25 or 30 years. It would be wise to make the most of it.
I am in a curious position today. I little thought when I entered Parliament that I would end up speaking with the backing of estate agents—not an element of society with whom I normally associate —but the National Association of Estate Agents will, I think, endorse my brief remarks on the regulation, or licensing, of estate agents, in particular of letting agents.
The buy-to-let and private rental sectors have mushroomed in recent years and are particularly prevalent in my constituency. For that reason, I am glad that the Government’s new national tenancy deposit scheme is starting up, as it will be important. It will, for instance, save thousands of my constituents from being—literally—robbed of their deposits by unscrupulous letting agents. Money is being withheld for no genuine reason. Of course, as the hon. Member for Richmond Park (Susan Kramer) pointed out, that is not the only way in which unscrupulous letting agents fleece vulnerable tenants. By definition, people in the private rented sector are more vulnerable; they cannot obtain mortgages and do not have the income to get on to the property ladder, so they are at the mercy of letting agents who have all sorts of ways of charging wholly unreasonable fees. In fact some of the activities I have come across can only be described as scandalous.
I know that my right hon. Friend the Minister for Trade has for the moment set his face against positive licensing, but will he reconsider that position during the passage of the Bill through the House? It seems to me that although the redress schemes are welcome and necessary and should be used, far fewer people would have to resort to them if estate agents were licensed. There would then be a reasonable expectation of minimum standards of professional competence and integrity, and a code of conduct would inhibit cowboy elements. There would thus be fewer transgressions that caused members of the public to have recourse to the redress scheme.
James Duddridge: Given that in most surveys estate agents and MPs are lumped together at the bottom of the league table as the most disreputable people, and that from the evidence in the national newspapers further regulation and codes of conduct have not seemed to do any good in politics, why does he think they will do any good in estate agency?
Dr. Turner: I have to take exception to the hon. Gentleman’s latter point. I accept his point about the popularity of politicians and estate agents, although I think we just about shade estate agents—at least I hope so; I should be bitterly disappointed to think that we were classed at exactly the same level. I disagree with the hon. Gentleman that sensible regulation cannot work. Good, reasonably light-touch regulation—it does not need to have knobs on—could be overseen by a body such as the NAEA itself. An annual licence fee will not make a big hole in the enormous turnover of estate agents, given that the sale of just one property can produce a fee of £3,000. If licensing promotes justice for tenants and property buyers it is well worth doing.
My right hon. Friend the Minister said that he was unwilling to move to regulate letting agents because of the lack of an adequate evidence base. Will he consider incorporating in the Bill enabling clauses to provide that in one year, or a maximum of two years, there should be such an evidence base? The Government would then be able to act rapidly and implement a scheme of regulation without having to wait another 20 years for a slot in the Queen’s Speech. That is the main wish—not gripe—I want to put to my right hon. Friend. I ask him to consider it seriously, as it could make an enormous improvement and make a good, well-intentioned Bill even better.
5.55 pm
Peter Luff (Mid-Worcestershire) (Con): It is not my intention to spend much time discussing the parts of the Bill that deal with estate agents. However, the exchange between my hon. Friend the Member for Rochford and Southend, East (James Duddridge) and the hon. Member for Brighton, Kemptown (Dr. Turner) prompts me to bring forward some remarks I had intended to make later in my speech.
I am indebted to the Committee on Standards in Public Life, which has enabled me to draw some definitive conclusions about the relative popularity of estate agents and Members of Parliament. I have good news for the hon. Gentleman: we do indeed shade estate agents. The survey states:
“These cards show different types of people. Please put them on this board to show which you would generally trust to tell the truth and which you wouldn’t.”
The answers showed that family doctors scored 93 per cent.; “your local MP” scored 48 per cent.; MPs in general scored 29 per cent.; estate agents scored 24 per cent. and journalists on newspapers such as The Sun, The Mirror or the Daily Star scored 9 per cent. But where are Ministers? Their score is 23 per cent.—1 per cent. lower than the estate agents they aspire to regulate in the Bill. Perhaps we should have a Bill to deal with Ministers—not in this Government, but Governments in general—rather than the Bill we are considering. There is a certain irony in the ranking.
Peter Luff: I give way with pleasure to the Minister, whom I hugely like and respect.
Mr. McCartney: In that case I take it that the hon. Gentleman’s last remark was an apology.
Peter Luff: Yes, that is right. An apology on behalf of us all for the political class who seem to have lost the trust of the general public.
My hon. Friend the Member for Rutland and Melton (Alan Duncan) and other Members dealt comprehensively with estate agent issues, so I want to talk about other aspects of the Bill. It is my intention to be non-partisan, as my hon. Friend was. However, the more I listen to the debate the more anxious I become about aspects of the Bill. I think we have now clarified that the DTI website is out of date and illiterate. It noted that the Bill
“completed it’s passage through the House of Lords”.
That apostrophe is a grievous error. It stated that the Bill would be given its Second Reading in the House of Commons and then referred—in large letters—to “Consumer Voice”. However, it is quite clear that the name “Consumer Voice” has been dropped by Ministers and the body will now be called the national consumer council. I admit that is not a big point, but it is important. I would have liked a new name for the new body, if it is to have a new role. A bit of rebranding would help to give people the idea that the new body had a slightly different and more ambitious purpose. I regret the fact that we are sticking with the old name.
Perhaps I should declare an interest on behalf of all of us. I think the Bill’s philosophy is right; it has the right objective, but as so often in politics it is a question of how we reach it. I have a big reservation about the abolition, in effect, of the consumer complaint function of Energywatch in particular, but also of Postwatch. We could experience a big increase in our constituency casework for a considerable period of time, because all the problems currently referred to Energywatch and Postwatch will comes to MPs instead. The House should be warned: this is a Bill to increase the postbags of Members of Parliament. Of course, that is not to say that the objective of the proposals is not honourable—it probably is.
I think that the Minister and most Members would agree that the ultimate safeguard for the consumer is a competitive market. In a truly competitive market, the consumer can say, “I don’t like the service you have offered me, so I will go to someone else instead.” That is the real protection: the discipline on the provider of a service or goods that if he does not perform he loses the consumer’s business. In that context, Ofcom’s decision to abandon price regulation in the telecommunications sector is interesting. Competition in the sector is now so intense that price regulation effectively becomes otiose. If we try to shift our mobile phone operators these days, the deals that we can negotiate with our current operator or prospective new ones are legion. That is clearly right.
As I understand it, the new structure that the Bill is designed to bring to consumer redress issues is based on the empowerment of the consumer. The consumer should do more of his or her complaining, assisted by
the Consumer Direct service. The proposed national consumer council will look more at the general overarching themes of consumer protection and consumer advocacy and will have a greater advocacy role. Where things cannot be reconciled by a direct complaint with the provider through whatever alternative resolution process is available, there is an ombudsman to deal with those hardest cases. I have no problem with that in principle, but the question is whether the various markets dealt with in the Bill are ready for this new philosophical approach.
I know that sceptical comments have been made about the Bill’s purpose. Is it a cost-saving measure? Well, it should save some costs, but I will give the Government the benefit of the doubt, as I do not think that that is the leading motive. I am concerned, however, about change for change’s sake, and I shall return to that a little later. Change can often be very confusing for the people served by the organisations whose functions are being changed. The basic idea of removing the state-funded intermediary and putting more power into consumers’ hands—with advice from state-funded bodies such as Consumer Direct—is a sound one.
Let us reflect on some of the particular issues. I was interested to read the National Consumer Council’s briefing, which endorses that basic approach. It states:
“The present combination of complaints handling and policy advocacy has necessitated that resources are channelled into resolving complaints which has left advocacy under funded and less effective than it might be”.
I think it has a point there and that the new structure in the Bill stands a real chance of improving matters. I will return to some of the NCC’s specific concerns about energy regulation a little later.
I share the concerns of the hon. Member for Richmond Park (Susan Kramer), who was worried about the completeness of the package offered in the Bill. It aspires to establish a more all-embracing consumer body, yet the two specific functions being rolled into it are—as she rightly said, and perhaps coincidentally, perhaps not—the Department of Trade and Industry functions of postal services and energy, rather than the issues of huge concern to consumers, such as the rail sector, financial services, telecommunications and water, even though the latter is included in the Bill.
Let us examine clause 24, particularly subsections (1) and (9), which deal with the provision of information to the council. Subsection (1) states:
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