Consumers, Estate Agents and Redress Bill

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Clause 44

Requirements for making regulations under section 43
Amendment made: No. 62, in clause 44, page 26,line 28, leave out paragraph (a) and insert—
‘(a) set out the standards the regulator proposes to prescribe,’.—[Mr. McCartney.]
Clause 44, as amended, ordered to stand part of the Bill.

Clause 45

Information with respect to compliance with complaints handling standards
Amendment made: No. 63, in clause 45, page 26,line 37, leave out ‘where standards are’ and insert ‘in relation to standards’.—[Mr. McCartney.]
Clause 45, as amended, ordered to stand part of the Bill.

Schedule 5

Information relating to compliance with complaints handling standards
Amendments made: No. 64, in schedule 5, page 61, line 16, leave out ‘where standards are’ and insert ‘in relation to standards’.
No. 65, in schedule 5, page 61, line 32, leave out ‘where standards are’ and insert ‘in relation to standards’.—[Mr. McCartney.]
Schedule 5, as amended, agreed to.
Clause 46 ordered to stand part of the Bill.

Clause 47

Membership of redress scheme
Mr. Prisk: I beg to move amendment No. 32, in clause 47, page 27, line 19, leave out paragraph (b).
This simple, probing amendment would remove the Secretary of State’s administrative role when setting up a redress scheme and leads to a single, simple question for the Minister: will he explain why the Secretary of State would need to directly administer a scheme? It is important that redress schemes are approved by a local regulator, but it is also important that they are independent of central Government, and are seen to be such. Therefore, could the Minister explain why the Government deemed it necessary to be so involved, directly or indirectly, in the administration of redress schemes? What exactly could the Secretary of State do that the regulator could not?
Mr. McCartney: I thank the hon. Gentleman for the spirit in which he moved his amendment. I accept that it is a probing amendment, and I hope that my response will explain fully the intention of clause 47. If he has any further questions to put to me, I will respond to them, and I hope that he will then feel able to withdraw his amendment.
The amendment relates to clause 47 and the redress provisions in this part of the Bill. The clause will introduce a power for the Secretary of State to require service providers in the energy and postal services sectors to belong to a redress scheme. It will, in effect, give consumers in those sectors greater assurance of achieving certainty in the resolution of complaints. So that there is no doubt, I will explain how the measure will work in practice.
Under the Bill, the Secretary of State will be given the power to make an order that requires regulated service providers in those sectors to belong to an approved redress scheme. If minded to exercise the power, the Secretary of State can consult the relevant regulator and others who represent those with an interest in the matter.
The purpose of that consultation includes the need to obtain confirmation of sectoral redress requirements and to look at the appropriate scope of the redress schemes. The Bill stipulates that, before making such an order, the Secretary of State must be satisfied that there is at least one qualifying redress scheme that regulated service providers can join or that such a scheme will be in existence when the order comes into force. That is critical. Parliament, through the Secretary of State, has a role to play in this. Having set out the principle of redress schemes in the Bill, it must ensure that they are established in practice and within the context of the clauses on the standards expected of the schemes.
It is worth emphasising that we have no reason to believe that at least one suitable scheme for each sector will not be established by industry. However, we need to cover all eventualities, and in the highly unlikely event of a scheme not being established by industry, the clause contains provision for the Secretary of State to establish one. That is also critical, as it is Parliament’s role. There is all-party consensus on establishing redress schemes on behalf of the consumer. Therefore, we must take responsibility in extreme circumstances—and they would be extreme—to make sure that a redress scheme is established. Hence clause 47(1)(b) allows for the establishment of a redress scheme administered by the Secretary of State or by a person appointed by him. That will provide an additional guarantee that a qualifying redress scheme will exist for regulated providers in the energy and postal services sector, to comply with an order made by the Secretary of State.
To be perfectly clear, under these provisions, the term “redress scheme” holds the same meaning regardlessof whether it is established under clause 47(1)(a) by industry and approved by a regulator, or underclause 47(1)(b) and administered by the Secretary of State or by a person appointed by him. Hon. Members can rest assured that, if it were necessary for the Secretary of State to use the fall-back provisions contained in clause 47(1)(b), there would be no compromise over the need for the independent person to be independent. It would still be possible for consumer complaints to be made to, and investigated and determined by, an independent person. That would be based on the principles set out in the legislation.
Clause 47(7) provides that, in designating a scheme in relation to regulated providers under clause 47(1)(b), the Secretary of State must be satisfied that the scheme meets the same criteria for approval by a regulator as those set out in clause 49. The important assurance that the hon. Gentleman wants is that, if the Secretary of State were to establish a scheme in extreme circumstances, it would not be—in popular parlance —a Mickey Mouse scheme; in all respects, it must at least be compatible with a scheme established under clause 47(1)(a). Therefore, I can say with certainty that this provision is not a stop-gap to fulfil in practice what is set down in the Bill.
The clause will not provide the Secretary of State with the power—if ever it had to be exercised—to provide a second-class or third-class scheme, or a scheme that complies with the law but not with the spirit of the law. It is very important that, if we have to do this in extremis, we do it on the basis of fulfillingthe commitment in the legislation to ensure that all consumers in those sectors are covered by a redress scheme. I hope that, given that assurance, the hon. Gentleman will be minded to withdraw his amendment.
Mr. Prisk: I am grateful to the Minister for his remarks. I would not imagine for a moment that the current Secretary of State would organise a Mickey Mouse redress scheme, and I am delighted that the Minister has confirmed that.
The main point is the use of the word “administered”. If the word “established” had been used, there would have been no concern in my mind. I agree with the Minister that, quite understandably, if we wish to have redress schemes, we must ensure that the Government can put them into practice if they exist. Therefore, I understand the use of the word “administered”, but I am not entirely sure whether the Department would wish to run such a scheme directly, although the Secretary of State reserves the power to appoint someone else to run it for him That was the essence of my inquiry.
However, I was assured by the fact that the Minister made it absolutely clear that the provision would be used only in the most extreme circumstances where,for whatever unforeseen reason, such a scheme wasnot available. Having wished it to occur, it would be peculiar if the Government were unable to put that wish into practice, having legislated for it. Therefore, on that basis and having had that clarity put on record, I am more than happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Lorely Burt: I want to probe the Minister a little and get one or two assurances from him. Liberal Democrat Members are a little worried about multiple redress schemes, which, among commercial entities, may prompt a race to the bottom. Therefore, we are interested to know what the rationale is and how the Government will ensure that, if there are multiple redress schemes, they can adhere to a good minimum standard, to ensure that there is no race to the bottom.
We would like to know whether there will be an ombudsman scheme. We understand the logic in having the scheme for gas and water supplies, but we have one or two concerns about the Post Office, because the typical redress offered by the Post Office is a bookof first-class stamps. Given that the ombudsman or redress scheme will require evidence to demonstratethe problem, we are stretching our imagination to understand what the evidence might be in such small-scale complaints or problems that might apply. For example, if the Post Office has not delivered a parcel, will someone need proof of posting? If the Post Office is closed, must someone stand in front of the CCTV and wave an envelope around before popping it into the post box as proof of posting?
If we are promising a redress scheme, people have the right to expect a redress scheme. We are getting rid of watchdogs, so redress schemes will have to be really good. Can the Minister perhaps give an example of a suitable redress scheme that might apply in the circumstances that I have outlined?
Mr. McCartney: I thank the hon. Lady for her question. I would like to point out that we are not getting rid of watchdogs; we are creating a new, more effective independent one. For the first time, all sectors will have redress schemes. What is the point of having a watchdog with no teeth?
The Liberal Democrats are strangely wedded to maintaining the old system on the basis of “Well, that’s what’s there”. Actually, we believe that a great deal of improvement can be made in all the sectors, and that is why, for the first time, there will be at least one redress scheme per sector—a redress scheme and regulator with teeth and a new body representing consumers, also with teeth.
11.15 am
The Bill leaves open the possibility of a regulator creating just one scheme for each sector. Of course, we have set out and debated the high standards that will apply, so no Mickey Mouse schemes will get in under the radar, as I put it in the last discussion. No schemes will be set up in any of the sectors that do not meet and operate to the standards set out. That is important. Our policy preference is for one scheme per sector, but we cannot prescribe that because it will be a matter for the regulator, and rightly so.
Circumstances might change in years to come to facilitate more than one scheme in a particular sector. Changes might take place in the market for which the current arrangements are inappropriate and act as a barrier to other entrants to the market. Amendments might, therefore, need to be made. That is the reason for the flexibility—not to rush downwards, as thehon. Lady said, but to ensure that, in a changing marketplace, consumers’ rights are always paramount. Changes made in the future will improve people’s rights, not undermine them. That is important.
Rest assured, the clause will establish an essential means of ensuring effective schemes covering all sectors in the Bill and, hopefully, after 2008 and further consultation, the water industry as well. I hope that, well before 2008, those schemes will be operating effectively. I hope that those explanations have helped the hon. Lady with her concerns.
Question put and agreed to.
Clause 47 ordered to stand part of the Bill.
Clause 48 ordered to stand part of the Bill.

Clause 49

Approval of redress schemes
Mr. Prisk: I beg to move amendment No. 35, in clause 49, page 28, line 40, leave out ‘relevant’.
This is a very simple probing amendment focusing on the meaning of the word “relevant”. My purpose is to clarify what a “relevant consumer” is. To my mind, all consumers who use energy supplies are relevant where redress schemes are concerned. Will the Minister tell us, therefore, who are not “relevant consumers”?
Mr. McCartney: I accept that this is a probing amendment, and I hope to give a detailed response to help hon. Members.
Amendment No. 35 relates to redress schemes under clause 49 and the matters that a regulator must take into account prior to approving a redress scheme in its sector. The interests of “relevant consumers” is one of the aspects that a regulator is required to consider when approving a redress scheme. By deleting the word “relevant”, the amendment would require the regulator to have regard to the interests of consumers in general when dealing with the regulator’s regulated providers, instead of to those specified as “relevant consumers” in the second column of the table in clause 42.
“Relevant consumers” of the regulated providers listed in clause 42(1) are defined in the Bill. For gas supply licences, it is:
“A person who is a consumer in relation to gas supplied by a gas supplier (within the meaning of Part 1 of that Act)”,
or, on transportation licences:
“A person (other than a gas licensee) who is a consumer in relation to services provided by a gas transporter (within the meaning of Part 1 of that Act).”
I think that the second definition was an amendment in another place following a cross-party debate.
For electricity supply licences, it is:
“A person who is a consumer in relation to electricity supplied by an electricity supplier (within the meaning of part 1 of that Act)”,
or, on distribution licences:
“A person (other than an electricity licensee) who is a consumer in relation to services provided by an electricity distributor (within the meaning of Part 1 of that Act).”
For postal services, it is:
“A person who is a consumer in relation to relevant postal services”
within the meaning of section 41 in part 2 of the Postal Services Act 2000. For water, it is:
“A person who is a consumer in relation to services provided by a water undertaker, sewerage undertaker or licensed water supplier in its capacity as such.”
There is no intention to attempt to limit or exclude any particular consumers in the sectors to which the redress provisions are to apply—the energy and postal services sectors. The main point to note is that the provisions are to be applied by more than one regulator, so each will be required to take account of the interests of relevant consumers in relation to its regulated providers. The expression “relevant consumer” refers to the consumers identified in the table inclause 42, as I have just explained.
Orders made by the Secretary of State concerning membership of a redress scheme introduced under clause 47 will be binding on regulated providers. It follows that the consumers in a position to benefitfrom the introduction of the redress provisions will be those who qualify by virtue of the fact that they are consumers of services supplied by those regulated providers. They are the relevant consumers whose interests a regulator must take into account when deciding whether to give approval for a redress scheme. I hope that that explanation will provide clarification for the hon. Gentleman and encourage him to withdraw the amendment.
We expect that service providers will establish their own redress schemes, which will be funded by their members. The members of the schemes will decide and agree on their funding structures, but we expect that they are likely to follow a pattern similar to that of existing redress schemes whereby a subscription fee is levied, typically based on the size of a firm or its turnover, coupled with a case fee payable by each member for every case referred to the scheme. The scheme is then free to consumers.
The redress schemes are expected to operate on a cost recovery basis. General practice is for fees to be set at a level that covers the costs of the scheme, based on the anticipated number of complaints. Fees can then be reviewed regularly and adjusted to reflect any differences between the actual number of complaints received and the estimated level of complaints.
Similarly, any scheme administered by the Secretary of State would operate purely on a cost recovery basis and could not be profit-making. Any subscription costs or case fees charged to members of a scheme would be set and periodically adjusted only to cover the costs of running the scheme. I hope that that provides additional clarification. The schemes will not be profit-making enterprises; fees will cover their costs to ensure that they are free in all circumstances to the consumer who wants to make a complaint and have it dealt with effectively.
Mr. Prisk: That was a thorough, comprehensive exposition and will be helpful. A number of people who are following our deliberations wanted clarity on the matter, and the Minister was extremely helpful. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 49 ordered to stand part of the Bill.
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