Examination of Witnesses (Questions 1-19)|
11 NOVEMBER 2008
Q1 Chairman: Gentlemen, thank you very
much indeed for coming to this Committee for this one-off evidence
session on Consumer Focus. We were hoping to hold it a couple
of weeks earlier but that proved impossible. Never mind. We are
now in business. Thank you for your kind words about our report
yesterday on the Post Office Card Account. That is a very good
precedent for witnesses to have set, to flatter the Committee
before they come in. It is a good strategy which I commend to
other witnesses. Let me ask you, as I always do to begin with,
to introduce yourselves for the record.
Lord Whitty: I am Larry Whitty.
I am the Chair of Consumer Focus.
Mr Mayo: I am Ed Mayo and I am
the Chief Executive.
Q2 Chairman: At 11 o'clock, we will
interrupt proceedings for two minutes. I will invite the Committee,
witnesses and members of the public gallery to stand for two minutes'
silence in accordance with the Speaker's wishes. Thank you very
much. I was involved in the debates about the establishment of
your organisation and this Committee has taken a close interest
over the years in Postwatch and energywatch and consumer affairs
generally. I have to say that I still find this new system incredibly
difficult to understand. This is a confession from the Chair that
may shock you: I did not even know there was a thing called the
Postal Redress Service until I read the brief for today's meeting.
I have seen no public mention of the Postal Redress Service anywhere.
There is the Energy Ombudsman, an energy redress service, Consumer
Focus, Consumer Direct, I think the National Consumer Council
still exists, there is a service funded by the OFT, then there
is water which often causes concerns, and the financial sector
has a different system. I asked the Committee before you came
in. We find it very confusing and yet we are supposed to signpost
our constituents to solutions. It does look very, very muddled.
Mr Mayo: I do want to apologise
to the Committee for getting the dates wrong at an earlier point
and thank you for seeing us at this time today. In some ways,
I think is a more complex system. You are right to say that with
energy issues, in particular, if you had a problem you would go
to energywatch, if you had a problem with the post you would go
to Postwatch. Now consumers have additional rights: the ombudsman
scheme, and a similar scheme in post, new rights for consumers
to get problems solved. However, if you look at consumer affairs
in general this is a sensible rationalisation. If you had a problem
as a consumer before, with postal issues you would go to Postwatch,
with energy issues you would go to energywatch, and if it was
advice more generally then you would go to Consumer Direct. It
seems to me entirely sensible to bring together the different
advice lines into a single point of call for consumers, which
is Consumer Direct, run through the Office of Fair Trading. To
bring together the fragmented, piecemeal, and sometimes cheese-pared
consumer organisations into one single organisation is a change.
We have looked at some of the communication that you as MPs have
had from BERR, and I think it probably fair to say that a better
job could be done. We can play our part in doing a better job
to explain what the changes are.
Q3 Chairman: I think it is rather
important. I had a communication with Ofgem which seeks to explain
how we should now deal with energy complaints. It refers to the
Energy Ombudsman but gives no details of how to contact the Energy
Ombudsman. It is a little card to send to constituents which would
be of no use at all because there is no contact detail. I really
think there needs to be some urgency in clarifying the system,
setting out a coherent way in which consumers of all utilities
and other public services should complain, including issues that
go beyond your remit, to make sure there is a one-stop shop to
source advice on how to complain.
Mr Mayo: I think that would be
very welcome. There are complaints right across the economy, including
in public services, as you have said. Some of the recent work
or previous work by the NAO has pointed that out to be a real
area of weakness. For simplicity, the simple headline message,
I would repeatand this is not about our work, because the
Act that set up Consumer Focus set us up as an advocacy body,
Consumer Direct does the advice workthat is if anybody
has a problem with any consumer issue at any point in time they
should ring Consumer Direct on 0845040506. That is a single point
of information that can put you through whatever problem you may
have. At its front end, I think it can be simple.
Q4 Chairman: You see, I did that,
myself, as you might expect. We had a problem with a post office
closure, and I could not trace down Postwatch. I could not recall
how I should take on the appeals process for a post office. I
spoke to one of the ladies at Consumer Direct, who said, "Oh,
yes, there is a dedicated number for that now," so I went
to that number and it turned out to be the Royal Mail Group and
was not a consumer line. Contacting Howard Webber of Postwatch
is surprisingly difficult. Your website gave the wrong telephone
number. It is a mess. I think the timing of Postwatch's abolition
was curiously unfortunate. It is a shame that this did not take
place in the spring, after the process was over, but it is difficult.
The Consumer Direct people did not seem to know quite how to handle
a Member of Parliament who wanted advice.
Mr Mayo: That may be worth taking
up with Consumer Direct, but I will pass that information on,
and I have to say that that is not an isolated incident. The changes
that we had over 1 October took place at a high risk period. If
you want views on timing, Larry might give his views as well.
We were making this change, it was a complex change, bringing
together three organisationsbut not simply into one because
the consumer handling was moving over to Consumer Directit
was a high risk project to run, and the timing did make it of
far higher risk. It was a time of rising energy prices, still
high, with the Post Office Network restructuring programme still
underway. I think we did carry off a complex project without loss
to consumers, but there have been one or two casesand this
is clearly one of themwhere the information was not right.
By and large, however, I can report to the Committee that the
early evidence is that the handling of energy and postal complaints
seems to be happening in a smooth way, and, also, the new arrangements
are working well in terms of what was intended, which was to get
things right in the first place rather than have to put problems
right after. All of this change is about trying to tackle the
problems at source.
Lord Whitty: I think it is important
to recognise that our role is exactly as it says. We are there
to set the framework for dealing with issues. Whilst we do have
a safety net role in dealing with individual complaints, the front
end of complaints is dealt with by Consumer Direct. I think the
example you have given is probably a slightly off centre example,
in that general mail complaints are being referred sensibly through
Consumer Direct. The Post Office closure programme of course has
continued for a little longer than was originally estimated. I
will make a point about timing, which is not quite the same point.
You may recall when the legislation was originally proposed that
it was intended that the new organisation would be set up last
April. For various reasons relating to the delays in getting their
legislation through but, also, I think some assessment of the
Post Office closure programme, the view was taken that it should
not come into being until 1 October with its powers, and that
there should be a two-stage programme where we took over responsibility
of the staff on 1 July and be in full operation from 1 October.
I would not recommend that for any other public sector merger.
Either we should have taken over the responsibilities of energywatch
and Postwatch entirely as of 1 October and run them as a central
organisation for that period or everything should have happened
on 1 October. Doing a two-stage process was not particularly helpful,
and I think in the circumstances we managed it, but it was the
decision on timing that was probably the wrong one. We came through
it. We have established the organisation. We are up and running.
Indeed, on the Consumer Direct front I was very worried about
that situation two or three months ago but I think most people's
experience of going through Consumer Direct for energy and post
purposes has been positive and it has been dealt with at least
as effectively as previously.
Q5 Chairman: Until I read the brief
for our meetings I was not aware that you have obligations to
investigate complaints yourselves in relation to vulnerable customers;
a complaint by a consumer where the Council considers the subject
is of general relevance; disconnections and failures of pre-payment
systems; and complaints to the Postal Services Commission in certain
circumstances. It is not absolutely clear cut, but for ordinary
consumers you say that it is Consumer Direct first and they will
always signpost in the correct direction and give advice on where
the complaint should go.
Lord Whitty: Always is a heavy
Q6 Chairman: It is quite important.
Lord Whitty: That is the intention
and no doubt you will discuss with OFT and Consumer Direct how
they are doing it, but the experience at the point of changeover,
which was very high risk, was that at one point it looked as if
the OFT were not going to get their ducks in a row. They did do
it, however, and in general it has worked extremely well. We do
have a second tier absolute obligation in cases where cut-off
is threatened or has happened. That is our clear obligation. We
have an obligation also to look after the interests of vulnerable
consumers which would be passed on to us mainly from Consumer
Q7 Chairman: In relation to issues
of general relevance that you need to know to do your work, your
advocacy, your information role, you are convinced that you will
access that information and that you will know what is going on.
Mr Mayo: We have an arrangement
with the OFT, Consumer Direct, the ombudsman and other sources
of information, to be able to spot trends in the market, trends
in complaints, so I am reasonably content that that information
will be available and we can make judgments as to whether to take
a complaint of general interest. There is a strategic decision
behind that as to which ones we take, but I think we will have
Q8 Chairman: Do the Energy Ombudsman
and the Postal Redress Service need to be visible to consumers
directly or do they not need to worry about them too much because
they will get referred on by Consumer Direct if it is appropriate?
The Postal Redress Service is almost totally invisible.
Mr Mayo: That is fair to say in
these early days. It is a good question about people's advice
seeking behaviour, as to what they need to know. The idea of an
ombudsman is increasingly recognised. What is difficult for consumers
is that some markets have an ombudsman and others do not. There
are big areas of consumer complaints which have no ombudsman at
all, so no recourse to alternative dispute resolution. I think
other countries have handled this by having ombudsmen who take
a broader role, so that if you have a problem you know you can
turn to an ombudsman for dispute resolution. The focus probably
needs to be on widening the profile of Consumer Direct. They handle
very significant numbers of calls at the moment. They are relatively
young as a service and do a good job, but I would put the emphasis
and probably any money that is there into building the awareness
of Consumer Direct, which can then pass people on to where they
need to go
Q9 Chairman: If I could make a detailed
point, a niggle really, obviously we all love the internet and
we all use it all the time but one of the problems is that information
can disappear from the internet all too easily. Hard copies cannot
disappear but web pages can disappear. So have the pages of Postwatch
and energywatch. They have miraculously disappeared. All their
old reports, publications, are no longer available. They have
Mr Mayo: I can send you the links
or the information in order to get through to that. We will have
that available. There will be archive that is there. Much of that
information which is live; for example, critical information about
social tariffs or energy information is on the site. Like all
websites, everybody says, "Our website is under development"
and that questionably is the case for us as well. We started with
a relatively simple website and so the functionality is not there.
But, no, we can get through to that.
Q10 Chairman: The old cynic in me
thinks that Postwatch and energywatch were abolished in part because
they were too effective and making the Government's life a bit
too difficult. Mr Asher is a pretty outspoken critic of the energy
sector. We do want to see access to historical comments and documents.
Mr Mayo: That is very welcome
and I would endorse the comment. My view is that Postwatch, energywatch,
and the National Consumer Council were high performing organisations
and I am proud to take an organisation forward that has that kind
of track record and that expertise. It is good to see changes
coming through in the energy market, for example, from the Ofgem
probe, that reflect your work as a Select Committee but also the
input of the energywatch team, including Allan Asher himself.
Q11 Chairman: Could you give us an
account of how you are going to do your work on this role now.
Obviously people like energywatch did a lot of background work,
a lot of research and very thorough, detailed work. I did not
always agree with Allan Asher, but whatever you made of the conclusions,
they were always based on a lot of serious analysis. How are you
going to influence the political process now in relation to the
policy areas that are currently your responsibility? You have
made some comments in the public arena but what work are you doing
to underpin your comments?
Lord Whitty: You will have seen
our forward programme of work, some of which is taking forward
work done by the predecessor organisations. In relation to energy
particularly, one of our major pieces of activity at the moment
will be on fuel poverty for fairly obvious reasons. We have been
very active on that front. We do of course inherit not only the
remit of energywatch but also a significant number of staff in
the policy and analysis area of energywatchone of them
was on the box last nightwho carry forward the whole energywatch
tradition in relation to energywatch prices. That material is
there. It is not lost on the website, in the ether or anywhere
else. We have it and it is embodied in some of our staff and the
material that we have. I should make the point that in policy
terms and campaigning terms we are the best resourced that any
combination consumer organisation has been. Our budget, our staffing
and our remit are broader in scope than the combination of the
policy bits of the predecessor organisations and whatever has
Q12 Chairman: We will come back to
postal services, but there is big work to do in energy and postal
services at present which will require some very thoughtful analysis.
You are able to assure the Committee that analysis will still
Lord Whitty: Indeed, yes.
Q13 Mr Binley: I wonder whether you
have enough people to do the job that you are supposed to do.
I want to talk a little about the costs related to that scenario.
You will know that the bodies you are taking over from employed
396 people when you took over. I think your core staff is 170
now. That is a drop of 60%. How are you going to do the same sort
of work with that sort of cut in staffing levels?
Lord Whitty: As I was just explaining,
we are not doing the same range of work. A large number of staff
which energywatch and to some extent Postwatch had were on complaints.
That is primarily the responsibility of other organisations, recently
Q14 Mr Binley: I understand that.
Lord Whitty: That accounts for
the bulk of the loss of staff from energywatch and Postwatch.
We will have a core staff of 170 people which will be more than
the combination of staff who were directly funded in the previous
organisations on campaigns, on policy, on research, on analysis.
We also have a larger research budget than the predecessor organisations
had. I am sure Ed can go into the figures and there are more if
you would like them.
Q15 Mr Binley: I noticed that. Because
you are cutting costs at only 45%, if you look at the matter in
those terms you are getting more money. I think you are getting
about £88,000 per person. That is a lot of money, is it not,
for your core staffing figure? What are they going to be doing
for that money?
Mr Mayo: Our focus is on campaigns
and advocacy, so we have an expansion of the resources and effort
on campaigns and advocacy compared to the three organisations
that were there before. The logic of bringing together three organisations
around these is so that we do not have to look at issues in silo.
It is much more sensible to look at Post Office issues if you
can also look at other community services. In terms of a vision
for the future of a sustainable network, it is helpful if we can
look at the energy issues that energywatch did and also at sustainability
and climate change issues in the way that the National Consumer
Council did. Bringing those together makes sense. There are some
opportunities, as well, around new roles. For example, I will
bring in a chief economist. That is a really helpful addition
because so many consumer issues are affected by economics and
economic policy, the working of the markets. A chief economist
will be able to contribute to our thoughtful analysis. I take
your point, Chair, about the predominance of commentary rather
than research and I think is an "early days" phenomenon
for a new organisation. The work is going to focus on campaigning
and advocacy, to make a difference for consumers. A comparison
with the three organisations that were there before is more of
comparison of apples with pears, because a significant amount
of what they were doing included this work around complaints handling.
Indeed, one of the criticisms from the National Audit Office,
amongst others, and the Public Administration Committee, if I
am right, was that the complaints handling can crowd out that
key campaigning work and yet it is the campaigning work that stops
problems happening in the first place. It is alive to new issues.
That is the core of what we are doing. We have offices in London,
Cardiff, Glasgow, co-located in Belfast, and we are holding over
an office in Bournemouth with energy staff so that we are completely
sure that we are able to handle matters.
Q16 Mr Binley: So it is a conscious
management policy to ensure that you employ better people with
more multi-skilling in that scenario.
Mr Mayo: We have taken as many
staff as we can from the current organisations. There is something
of a mismatch, in some sense. Postwatch, for example, had an extensive
set of offices outside of London which we have closed in coming
down to a smaller estate based around four key offices. But, yes,
we have taken as many staff as we can and we are now looking to
recruit the additional staff. Going back to your original question,
the key services that we provide to the public, including the
support for vulnerable consumers, sitting behind Consumer Direct,
and some of the out and out campaigning work that is needed on
key issues of currency, like fuel poverty, energy markets and
the like, are handled. In other ways, however, with recruiting
staff, it is going to be a little while before we fully find our
feet as an organisation, and you should expect to see our work
grow and develop over time.
Lord Whitty: The other point in
relation to your figure for members of staff is we have a large
research budget which would account for £3 million. If you
spread that over the staff, you get a much higher figure but we
would be commissioning research and engaging others in research.
Q17 Mr Binley: One does assume on
that basis that you are paying more money for better people. You
are telling me it is not the case. You have taken many of the
people who were in the existing organisation.
Lord Whitty: As of now, we have
roughly filled half of the permanent staff. There are some people
covering transitionally. When we are fully staffed, half of our
staff will not have been in any of the previous organisations.
That will be the situation come February roughly.
Q18 Mr Binley: They will be of higher
quality with a greater skills base?
Mr Mayo: I would not characterise
it in any way that we are bringing in better staff at higher pay.
We have a fantastic set of staff teams from across the three organisations.
The vast majority of the senior roles, at pay which is commensurate
with what they had before, would be taken over from the three
predecessor organisations. There are some specialist skills, like
those of a chief economist, which none of the three organisations
in their smaller functions could have afforded to bring in. There
are one or two cases like that.
Mr Binley: I would like to go on to the
costs of Consumer Direct. On our own figures, you say it is about
£8 a call, which I presume is about two calls per operator
hour or something of that kind.
Chairman: This would be more appropriate
on OFT's questions.
Mr Binley: Yes, but it is in the briefing
and I would like to understand a little more about it. That is
a costly operator response level, is it not? Would you look at
that for me? If you look at the private sector the average is
about £4 per contact and you are talking about £8 per
contact. I wondered what made the difference.
Chairman: It is more for the Office of
Fair Trading to answer this question.
Q19 Mr Binley: I understand that, but
we have already said on this issue, if you were to ask the question,
Chairman, that you would get the answer, so I assumed the same
thing would apply to me.
Mr Mayo: I would be very happy
to talk to colleagues at the Office of Fair Trading to get that
1 Footnote by the Office of Fair Trading: The
£8 figure is an average cost per contact, not the cost per
call. OFT's contact centre in Northampton does not simply take
calls from energy and post complainants. It also handles email
and written correspondence, the costs of which are considerably