Consumer Focus - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 20-39)


11 NOVEMBER 2008

  Q20  Mr Binley: I would be most grateful.

  Mr Mayo: I think you can take some comfort from the fact that there has been a good deal of attention across public services at improving the cost-effectiveness and the performance and the experience of users in relation to public sector call centres, so there has been a very strong focus on that. There are good benchmarks in terms of the efficiency there. Consumer Direct, I believe I am right in saying, comes out quite acceptably on that, but I will follow up with colleagues at the Office of Fair Trading to get you an answer on that.

  Q21  Mr Binley: You have talked about skills and mapping those skills. How are you doing that? How are you making sure that you are covering it in more detail? That is a pretty important part of the set up procedures, is it not?

  Mr Mayo: In terms of designing the new organisation, we have looked at the core competencies that we need in order to be able to carry out our work. It is a unique privilege in some ways designing a new organisation. It is like setting the DNA of something that then really needs to work over time. The National Consumer Council operated for 30 years, and energywatch and Postwatch for a shorter period, so we have been quite careful in designing in the skills and competencies that can reflect a very fast-moving consumer experience and consumer market. If you look online, for example, things are moving incredibly fast with the emergence of new consumer communities online and therefore building in more of a capacity for online action.

  Chairman: It is coming up to 11 o'clock, so I would invite everyone to stand.

  There followed two minutes' silence.

  Chairman: Thank you very much.

  Q22  Roger Berry: I have to say, like the Chair I find the system somewhat confusing. I guess I voted for it, so I should not, but I am slightly more worried about consumers. The basic thing consumers want is advice. They want support. They want a complaints procedure that they understand. The first port of call is quite important. Let us take the postal service. Your website suggests that a complaint in that case should go to the postal provider, but then you go on to say that Consumer Direct can also give advice and information. Do you want people to go to the postal service provider or do you want them to go to Consumer Direct?

  Lord Whitty: I think you probably have to go back to government and eventually Parliament's general strategy on this. In the regulated areas providers are pretty poor at dealing with complaints. We need to improve the way in which they deal with complaints themselves. The regulator has been given responsibilities for setting standards which they are now enforcing via Postcom and via Ofgem. We want consumers to be able to get better handling of complaints if they are going to the provider. If they are unsatisfied with that or unsure who to go to, then they go to Consumer Direct right across the board. That is the port of call. In energy, the reality is they were ringing the same call centre as dealt with energywatch's calls to start with. There is a continuity there which is hidden by the change of organisation. First: try your supplier if you know who that is. If you do not know who your supplier is or you have had no joy with them, then go to Consumer Direct.

  Q23  Roger Berry: Has that advice, for example, been made clear to organisations like the CABs?

  Lord Whitty: Yes, we have had very detailed discussions with the CABs and other bodies.

  Q24  Roger Berry: They have been given clear guidance on the direction in which inquiries or complaints for advice should go.

  Lord Whitty: Yes.

  Q25  Roger Berry: I would be quite interested to see the sort of advice given to CABs in terms of these areas.

  Lord Whitty: Yes.

  Q26  Roger Berry: The next question is about Consumer Focus and Consumer Direct. Understandably, you have made the distinction of the responsibilities and who is responsible for Consumer Direct. Is there not a problem here? Do you not think it would have been better if Consumer Focus had had the responsibility for the Consumer Direct service rather than it being a completely different enterprise?

  Lord Whitty: It could be argued, but Government and Parliament took a different view. We are here to defend and advance the cause of Consumer Focus. You could have designed the totality differently, but of course Consumer Direct already existed prior to the legislation as a service run by OFT on behalf of consumers generally and there was no appetite for shifting that out of OFT's remit on to another body. For us, there are some benefits, certainly at this stage of our existence, in focusing on advocacy, campaigning, policy, and dealing with government and business. In those areas there are benefits which maybe you would want to subject to review further down the line, and there are bits which are still with OFT and central government, including Consumer Direct, including consumer education, which perhaps at a later stage you might want to look at again. But the rationale was not ours, it was what Government and Parliament delivered to us.

  Q27  Roger Berry: A phrase about Consumer Focus sitting behind Consumer Direct was used earlier. What does that mean?

  Lord Whitty: That was in relation to our role in dealing with individual complaints, urgent and vulnerable consumer complaints. If they are not resolved at the first line and not resolved by the company then we have an obligation and a remit there. That is in relation to complaints. It is not hiding behind or sitting behind Consumer Direct in general. We are a very upfront organisation.

  Q28  Roger Berry: Lord Whitty, during the second reading debate in the Lords, in relation to the energy sector you said, "The existing ombudsman system in the energy sector is not up to scratch for the job that is envisaged in this approach." Indeed, you made comments earlier in a similar vein. Do you believe that the Energy Ombudsman is up to scratch to carry out the task?

  Lord Whitty: The Ombudsman, as I recall, was rather upset by my remarks in that respect. She got quite stroppy with me. The point I would make is two-fold. At that point the only scope for the Ombudsman related to billing, whereas complaints about energy companies can range from connections to repairs, to meter readings and so on. That was not then covered by the voluntary ombudsman service. The statutory ombudsman service covers everything. My other complaint was that it took rather a long time for complaints to be dealt with by the Ombudsman. I think a regulatory intervention has reduced that time somewhat. I think it could probably do with a further reduction, but the maximum now is eight weeks whereas at that time it was three months. There were a number of failings of the Ombudsman. The regulatory framework has changed.

  Q29  Roger Berry: Can I take you to the Extra Help Unit. As I understand it that, amongst other things, will accept complaints from MPs. This obviously raises the question: Is it widely known? Unless we keep it a secret, does this not mean that anybody who has a serious concern or complaint will go straight to their MP because they will send it straight to the Extra Help Unit, and we will be in the ridiculous situation that we have had with the CSA: "No reply unless you contact your MP," and with tax credit problems. We of course as Members of Parliament wish to serve our constituencies at any conceivable occasion, but we all know that we spend hours and hours every week as sort of postal workers, passing on complaints from constituents to the relevant body, because they believe and we know that we will get the reply and they will not. This Extra Help Unit worries me in that respect. Is that not the obvious way?

  Lord Whitty: Here we were thinking we were doing you a favour.

  Q30  Roger Berry: I am sure you were.

  Lord Whitty: We were trying to preserve the fact that prior to the change you were able to get straight into energywatch and their backup complaints handling service—not their frontline but their backup. We did not want to take that away from you. The situation has not changed with regard to that, therefore. If you and other Members of Parliament start getting more work, then there is something going wrong with the system, so we need to know about that. If that does start to happen, then OFT and ourselves need to address that.

  Q31  Roger Berry: I understand and appreciate the need for organisations to be encouraged to respond to MPs inquiries quickly, but are you not concerned that evidence from elsewhere—and the CSA is a classic of course—is that if the system is run so badly that people realise that going to their MP is the only way to get a reply, then this will increasingly happen. Will you be observing that experience and taking appropriate action if that turns out to be the case?

  Lord Whitty: We will indeed, because it is not only an increase in work rate for you, it will also be an increase in the work rate of the Extra Help Unit. If it gets serious, we will have to pick that up. As I say, it is the totality of the system which will need addressing in those circumstances. It is not that the consumer does not have somewhere else to go—in this case, they have Consumer Direct to go to, they have Consumer Direct's sign pointing them into the provider companies. I do not anticipate that this will happen, but if it does happen then we and OFT will have to address it. I also emphasise that what we are proposing is no different from what existed with Energywatch prior to the change.

  Q32  Roger Berry: For small businesses, a large proportion of their complaints are about energy issues. The Federation of Small Businesses have expressed concerns about the new arrangements, as you know. They feel that the advice and support being offered under the new regime is such that it is only offering a limited service to small firms. Have they misunderstood the new procedures in saying that?

  Lord Whitty: We are primarily a body which is focusing on the individual consumer, however we do recognise that a number of businesses, what I would describe as the vast majority of businesses, micro businesses, suffer some of the same difficulties in relation to the energy sector and in many cases the postal sector that an individual does. In those circumstances, in policy terms and in Consumer Direct and in the Extra Help Unit we would look in terms of complaint handling at treating micro enterprises roughly the same as individuals. There is a different issue relating to the somewhat larger firms. We are not primarily an organisation which looks after the interests of small business, medium size business or large business, though some of their problems are exactly the same as those of the general consumer. In terms of micro businesses, Ed may want to say something about the piece of research on their consumer concerns that we have started to do already.

  Mr Mayo: In brief, what you have outlined in terms of the small business experience of the energy sector is also amplified across other sectors. Once we start to look across the piece, which is something that we could do, a pattern emerges where particularly the smallest businesses may be losing out as consumers of services from other businesses. We have launched as part of the research work—it was the first piece of research that we launched—a study to look across the piece at the consumer experience of micro-enterprise. I think that is a unique study—that has not been done before, although there is experience in energy and in post. We are going to look at that to see what we can find. There may be interesting issues for you as a Committee to look at, such as whether there is greater consumer protection for individuals than there is sometimes for micro-enterprise. Would it be good to stimulate enterprise development if there was better protection for micro-enterprise in relation to some of these services; for example, in a rural setting, where some of these things are compounded? We are interested in trying to use the fact that we are a joined-up organisation across the piece to have a wider look. In that, we are collaborating very closely with the Federation of Small Businesses, the Chambers of Commerce and some of the other very effective small business representatives that are out there.

  Q33  Roger Berry: That is very helpful but the specific point the FSB have made is that something like 30,000 calls have to be made each year to energywatch from small businesses and with the new set up they are obviously concerned that the kind of service that used to be provided to these 30,000 calls will not be met. Are they right to assume that, or do they have it wrong? Do you have the capacity to provide the kind of response to small businesses that has been provided in the past?

  Mr Mayo: I would argue that they are wrong but I think that plane needs to be tested against the evidence. It is still very early days. I would argue that the treatment for businesses ought to get better because of, first, the ombudsman scheme. energywatch could never get a company to do something, they could only charm their way in by going in at a higher level than individuals or businesses could go into. The ombudsman scheme has now been opened out to small business, which gives them much greater rights in terms of that. Consumer Direct is handling business inquiries—although it is an important point to make sure that is promoted and understood. The Extra Help Unit that we talked about earlier for vulnerable consumers absolutely applies to vulnerable business consumers as well. I am confident that the new system should be delivering a better deal for small businesses but we will want to review what we are doing to make sure that happens.

  Q34  Chairman: Could I just check one thing. You are still legally the National Consumer Council. That is your legal name.

  Mr Mayo: That is our statutory name.

  Q35  Chairman: You chose to be called Consumer Focus. That is your choice.

  Mr Mayo: Yes.

  Chairman: I think it is slightly difficult for people who are not experts to try to understand the difference between Consumer Focus and Consumer Direct. I think the names are bewilderingly similar myself. But that is personal observation which colleagues might not share. Those who are not experts might find it difficult to understand the distinction.

  Q36  Mr Weir: In your forward work programme you make the point that in a time of economic uncertainty there is urgent work to be done. Both of you this morning have emphasised several times that your role is mainly in advocacy. Can you tell us a bit more of the role you see Consumer Focus playing during the current economic slowdown to ease the effects on consumers?

  Mr Mayo: One of the first things we did when we started was to organise a round table of consumer organisations and advice organisations and credit unions and others, to have a look at responses to the current financial turmoil and the contagion that was there. Coming on from that, we looked at the particular context of the Lloyds TSB HBOS merger and the consumer interest in relation to that. That is something that obviously the Office of Fair Trading has made an input to and it has been discussed in Parliament but we came forward with what was quite a creative set of ideas about what might service consumer interests better if that merger goes ahead and competition rules are waived. For example, we have argued—and we will take this case to the Lloyds TSB on a voluntary basis because competition authorities are not able to make this happen—that the Lloyds TSB and HBOS, if that merger goes ahead—and that is in the news at the moment of course—should be selling off branches to its competitors rather than just closing down branches, because it would reduce competition at a local level quite considerably if you have two of those banks now coming down to one or three with a third coming down to two. We think of campaigners pointing to problems and chasing down problems but we can also come up with solutions in that area as well. You will also be aware from the work that you have done that we have a very strong interest in energy prices. We are launching the next phase of our campaign to break down energy prices with the Daily Mirror tomorrow. We will do all we can to encourage a public setting in which at least one of the companies can break ranks and bring retail prices down in line with the reductions that we have seen in the wholesale market. These kinds of changes, if successful, can put money in people's pockets and make sure that they are better served by essential services over time.

  Q37  Mr Weir: One of my colleagues was asking more about energy and I have some questions about Lloyds TSB, but, before we go on to that, I was interested in what you say about your meeting with credit unions and other consumer bodies. Presumably there will be increased pressure on many of these bodies during an economic slowdown of people seeking help. Can you give them any direct help in dealing with people who come to them with financial problems during the recession period?

  Mr Mayo: We will work very closely with the face to face advice agencies but without in any way duplicating their work. We have an expertise, particularly around the energy side and the postal side, and so we have developed an advisor service of volunteers in advice bureaux and the like to be able to email through questions and get a response. We have developed that on the basis of a structured survey of advice agencies' needs. We will support them very closely in that, but we will not duplicate the work—particularly that of the money advice sector, which across the UK that provides an essential service. It is a service that needs resources to be able to support people. That is the frontline service, if you like, for consumers with money problems or household budgeting problems.

  Q38  Mr Weir: Moving on to Lloyds TSB, your letter to Lord Mandelson raised certain issues relating to that. Obviously Lloyds HBOS, if the merger goes ahead, will have a considerable share of the market; for example, 30% of the market in mortgages. Do you not feel that allowing anybody to have such a large stake in the market at this stage, irrespective of the particular circumstances that led to this, is going to make it more difficult in the future to prevent other banks increasing their stake in the market?

  Mr Mayo: Yes. It is our job to be sceptics on behalf of consumers. We do not like to see potential players that may be dominant in the market. We do understand the urgent circumstances and the need to act to secure the credit and financial system. I do not think it was for us to stand up and oppose the merger but I think it was for us to say that there are long-run consumer issues here that require strong regulatory scrutiny. Therefore, when we called on the Office of Fair Trading, as we have done, to launch an ongoing investigation into the mortgage market, as they have been running a personal account market, that was in order that the authorities could be ready to act if there was any evidence of abuse, because otherwise their system takes a long time to deal with these problems.

  Q39  Mr Weir: I appreciate that but by doing this are you not saying that 30% of the market is acceptable and not damaging interests of consumers by allowing this to go ahead.

  Lord Whitty: No. The reason we have asked the OFT to have an ongoing monitoring of this situation is that, normally, in almost all circumstances, 30% of the mortgage market, 30% of the retail banking market, is not in the best interests of the consumers. We need to maximise competition, not to limit it. The issues in the Government's judgment and to a large extent the financial sector's judgment was that the alternative was for HBOS to go under. If HBOS went under, then clearly not only the depositors and account holders in HBOS would suffer severe consumer detriment but competition would have been lost by that reason. In emergency circumstances, we did not oppose the merger but we made it very clear that this is not a normal circumstance and that we would want the implications of that merger to be continuously and effectively monitored by the authorities.

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