Consumer Focus - Business and Enterprise Committee Contents

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 repeat—and 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 work—that 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 organisations—but not simply into one because the consumer handling was moving over to Consumer Direct—it 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 cases—and this is clearly one of them—where 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 obligation, obviously.

  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 Direct calls.

  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 the information.

  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 gone. Why?

  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 energywatch—one of them was on the box last night—who 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 gone before.

  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 be done.

  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 Consumer Direct.

  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.[1]

  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 information.

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 higher. Back

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