Consumer Focus - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 60-79)


11 NOVEMBER 2008

  Q60  Mr Bailey: I do not want to put words into your mouth, but if I could summarise, you would not be, if you like, a second tier of appeal. You would just assess what has gone for somewhat indefinable future reference.

  Lord Whitty: There are three different issues here. One is that this round of closures has not yet finished and there are some escalations, as we call them, rather than appeals which are still to be heard and that is being dealt with by the former Postwatch board members and Postwatch staff and will run through to early new year. There is then the issue which I think you were really alluding to, which is, where the Post Office has made commitments on the alternative arrangements where there have been closures, what is the monitoring process for ensuring those are being delivered, and on that we do have a responsibility and it is in our work programme to continue to look at that. We also have a very clear, statutory explicit and individual role in the Act setting us up for the Post Office network as a whole, and were there to be, either directly or indirectly, another significant tranche of post office closures presented we would have to negotiate as to what our role would be. What I think Ed was saying, and I know what I feel, was that Postwatch, despite the criticism, did the best job they could in the circumstances but they were put in the position of saying, "If you put up an argument against that post office going we have to have another one down the road go". That is not a situation we would want the new organisation to go into. I think if we were looking at the totality of the Post Office network then we would need to look at a much wider role for the post offices in a much wider context of what public services and other services are needed area by area. One of the problems of the past two tranches of post office closures is that it is as if they had been looked at through a narrow prism of post office economics and a few criteria like access, which are important, but the reality is that the communities which have been most hit by post office closures are those where other services have also been disappearing in the less prosperous suburbs and in rural areas. There the post office is only one part of their lack of access to service and I would want any further review of the post office network to look at it in that wider context, and the role we would play in that would relate to that wider context.

  Q61  Mr Wright: Just on this particular point, you said you would be reviewing the results of the post office closure programme. In my area they closed two post offices very close to the main post office which has resulted in that main post office having a queue 45 minutes to an hour long, which in my opinion was a completely wrong decision, is against the consumer's interest and will probably push more people away from the Post Office. Would you be looking at that type of thing?

  Lord Whitty: We have been looking at it in general. We are required to look at it in general, and particular examples will be helpful, so members of the Committee and others may be feeding in information. Obviously, these new arrangements have not in all cases yet been established and within our work programme we are looking at it in general. We will not necessarily do it in the same way as Postwatch, partly because we will not have a regional structure and partly because we are moving into a new era of post offices where, formally speaking, the Government have effectively indicated that they are not looking for a new big tranche of closures and the Opposition have said likewise, so I am working on the assumption that the present network ought to be preserved. Obviously, issues like the Post Office Card Account may alter that, but if the current network is to be preserved then we want to look at how effectively it is operating both in terms of the alternative arrangements which were made as commitments as a result of the last round and more generally.

  Q62  Mr Bailey: I was about to say the elephant in the room, of course, is the POCA decision and, depending on how that goes, you could in certain circumstances have a pretty heavy remit in the very near future.

  Lord Whitty: We do. We endorse what you have said about the process of the Post Office Card Account, that effectively there is no serious consultation or assessing of the experience of POCA card holders and potential POCA card holders. There is to be no examination now of how the scope of the POCA card could be increased and I therefore think DWP's conduct of this contract is deeply flawed. I take heart from the letter from Lord Mandelson, which is in the papers today, which indicates that he has a vision for the Post Office which is somewhat broader than a narrow look at the Post Office Card Account and that contract, so I am hoping that is a positive indication that these wider issues will be taken into account before any decision is taken to move that away from the Post Office. I am hopeful that the Government are now addressing these wider issues.

  Q63  Mr Bailey: Just finally, changing the subject slightly, why are you exploring "the scope for a Community Services Advisory Group to take forward the successful work of Postwatch Counters Advisory Group"? The obvious question is, if Postwatch's Counters Advisory Group was successful why was it not just transferred to Consumer Focus?

  Mr Mayo: The Counters Advisory Group has been a very effective way of getting the different stakeholders together around the Post Office Counters network, and all we want to do is widen that out so that we can look at community services more widely. Postwatch was never able to look at that; the focus and the agenda had to be purely on post offices rather than this potential wider role that Larry has described. That is the shift. As it happens, when we have talked to people in the Counters Advisory Group they probably rather like the name so it may well be that we keep the same name. That is important to us. I think we have got a role in connecting through with a wide range of stakeholders who have got an interest in the services that are provided to consumers and communities, and that is one part of our forward work programme.

  Chairman: I just want to make the point, and I used my position as Chairman in the introduction to make this point, that there is no doubt the transition did have its casualties in the last round of the post office closures. In my own constituency I am quite clear we were unable to make the case as effectively as we might have done because the staff has altered so Postwatch were unable to attend the public meeting to discuss the closure of Bengeworth Post Office because they could not produce someone in time, so matters of fact remained in dispute about the post office closures, matters of fact which should have been resolved. Partly this Committee was concerned that the six-week period for consultation, as I always said, was too brief and my own constituency proved it to be the case. Having said that, we are where we are and that is past history but it was an unhappy period and I fear that if the card account does not go to the right place you will have to face it all over again, so good luck.

  Q64  Mr Wright: Just turning to the Consumer Law Review, the Government has been looking at this particular question since 2004. What does Consumer Focus want to get out of the Consumer Law Review?

  Mr Mayo: The Consumer Law Review is a great opportunity to modernise and spread consumer protection and consumer rights and to harness the power of consumers for more competitive markets. I think if things are good for consumers then they are good for the economy by and large. One example of this, an example of an area that we would press on, is access to redress because this is an area of relative weakness, if you like, in the UK regime. We do not have some of the models of collective redress that other countries have got. We have had a decision with the coming in of the Consumer Protection Regulations and the transposition of the Unfair Commercial Practices Directive which denies consumers the right to enforce that individually through the courts, which I think is a retrograde step and puts us behind countries like Ireland. Also, I talked earlier about the patchy nature of ombudsman schemes. Ombudsmen are a Nordic import, by and large a very successful and welcome addition to the consumer field and the economy, but you only get them in certain services and there are major areas of consumer complaints where we do not have ombudsmen services and it does not necessarily reflect the structure of the economy where services are provided across a range of professional services. If you are buying a house it is estate agents and maybe banks and mortgages or accountants and the like, so redress is one area for an advance. We are interested in some of the opportunities that may be there to make it easier for people to know what their rights are. In particular, in a tougher climate economically the safety net seems to slightly fall away. If you buy something on credit card you are covered but if you buy something on debit card you may not be. If you book a flight you do not know whether the airline company is going to go bust or not and quite what that would mean, or if you book a holiday, whether you are covered by the ABTA insurance or not. There are a number of areas of consumer protection that I think could be strengthened. The final area to look at is enforcement because by and large you do not need new rules but we could do a better job enforcing the rules that are there, and while we have a very effective enforcement community at a local level I think they would be the first to argue that it is both under-resourced and patchy across the country, not really relating through to consumer detriment but more to the circumstances of the funding or recognition for individual local regulatory standards.

  Q65  Mr Wright: Two of the areas that they are looking at are whether or not to have a principle based approach or whether it is going to be a prescriptive based approach, and quite clearly it seems to be veering towards the principle based approach. Will that create any difficulties for the various consumer advice organisations, do you think?

  Mr Mayo: I think there is a transition issue there as people get to understand the new approach and try to make that work. I think there has been some very effective work done within the narrow constituency of trading standards and BERR and some quite good involvement of the different stakeholders—the Advertising Standards Authority or the CBI and the like. That is very welcome. What there has not been is a wider public awareness. People do not know that this new right is there for them to be treated fairly, or rather not treated unfairly, so there is wider work to do there. On the question around the principle-based versus prescriptive-based approach, I think we are seeing that the principle-based approach opens up new opportunities for dealing with new scams that emerge that were loopholes, such as the Timeshare Directive, that whole saga of protection and legislation and trying to catch up with the latest problems and scams that have been emerging. The principle-based approach is more future-proof in that way, which is very welcome, but, just as there is a debate around the limits of a principle-based approach in the financial services market and the future of regulation, I think we need to take the same look in terms of the consumer field. There is a lot of merit in a principle-based approach but only and primarily if people know that that is the principle that applies and that is what their rights are and I think that is a gap in the current arrangements.

  Q66  Mr Wright: In terms of the EU, they are now looking at the possibility of a new directive in terms of consumer rights and presumably you will be advising the Government on that particular area, but quite clearly, for example, at the present time if a consumer has a faulty good they can take it back and get the money back in the UK whereas perhaps in the future it may well be the case that the goods that are taken back will be replaced or repaired and given back, so the UK consumer may well lose an element of strength that they currently have. How would you see that in terms of your advice to the Government?

  Lord Whitty: Our view of the EU level has been that we were in favour of the Unfair Commercial Practices Directive, which was a principle based piece of legislation and we would be in favour of principle based legislation in general. However, we are not in favour of maximal European legislation. In other words, if the European legislation harmonised, ie, made uniform, the rights so that there was no ability for the individual state to take it further, either in the case of pre-existing legislation, which is the kind that you are talking about in terms of money back, or in the future, then we would not be in favour of it. There is a big argument going on in Europe as to which approach you would take for future consumer legislation. We would favour a European-wide definition so that everybody in Europe had the same minimum rights but we would want to preserve the right, as is done in a lot of environmental legislation, for the individual country to go further.

  Q67  Mr Wright: So what you want there is for the standards to come up to our level rather than for us to go down across the board?

  Lord Whitty: Ideally, yes.

  Q68  Mr Wright: There is another area in terms of the rights of small businesses as consumers who get products from larger organisations, such as with unfair contracts, and one of the areas that we are going to be looking at is the question of the pubs. Clearly there are some smaller organisations that have contracts with larger organisations in the pub industry and we will be examining that. Do you think that this should be within your remit?

  Lord Whitty: Normally business-to-business relations are not within our remit. It is a question of whether the business's contractual position is similar to that and it is going back to the question of small businesses with energywatch. Generally speaking, business-to-business would not be our concern.

  Q69  Mr Wright: What we would be talking about in this particular case is one individual having a contract with a larger organisation. Although that would be regarded as a business, they themselves would be a consumer dealing with other consumers but also probably in many circumstances tied to a contract which might well be seen to be unfair in an open market.

  Lord Whitty: I am personally strongly against that and we are trying to break that down in terms of the supermarkets and the food chain, but I do not think that is central to our business except insofar as it affects and limits the choice of individual consumers, as in many cases it might. Ed may take a wider view but my instinct is to say that supply chain issues are not primarily our concern except insofar as they have a knock-on effect.

  Q70  Mr Binley: I think there is a real impact upon the consumer, Lord Whitty, in the way that you talked about post offices in suburbs and rural areas because bigger companies now demand a shorter payment time for goods. They go to their bank and their bankers are being really quite ungenerous in their response in many respects. I met with the retail small shops organisation yesterday and they brought this point particularly to me because they are fearful that many of their smaller retailers will go to the wall and that will impact upon consumers sizeably, particularly in rural areas. Can you not take it on in that respect because we need some urgent action?

  Lord Whitty: That in a sense is what I was saying. If it does have that effect or it has the potential for that effect then it is our concern. What we would not do is intervene in an issue which was solely a question between a supplier and a customer. However, I would say that I do believe the competition authorities, the OFT and the Competition Commission, should take the monopsony/oligopsony dimension of their responsibilities rather more seriously than has until very recently been the case, and I just cite the food chain as being one such area. It is not primarily for us to trigger it but I do think that that kind of imbalance of power does need to be addressed in the system.

  Mr Binley: I am grateful for that; thank you.

  Q71  Chairman: Monopsony and oligopsony are not words you often hear in Parliament.

  Lord Whitty: You got both in one sentence there.

  Q72  Chairman: I am impressed. You were not playing a game with your Chief Executive to try and get them on the record, were you? I have just one last area of questioning briefly before we let you go unless there are things you want to say to us we have not covered. Trading standards is another whole area of consumer redress, consumer law enforcement, which we have not talked about. You mentioned it briefly in answer to one question. How will you interact with trading standards departments?

  Lord Whitty: We have a very positive relationship with the Trading Standards Institute and in some cases with individual trading standards departments and we will need to build on that both in relation to enforcement of the law and in relation to general consumer information. We will want as part of our intelligence gathering to build on what trading standards departments would say. I should say that we think trading standards generally speaking do a very good job. We are concerned at issues that trading standards people may well be bringing to you themselves about the resourcing and the priority given by OFT and the Government to ensuring that trading standards are up to the job.

  Q73  Chairman: The lack of priority, do you mean?

  Lord Whitty: I put it neutrally but their view will be lack of priority, yes. If that is indeed the case that is something which needs to be addressed because you can have as many consumer rights as you like in the world but if you cannot enforce them, either through the courts or through trading standards, then they are not worth the paper they are written on, so our concern is that trading standards need to be an effective force as well as a partner in various things that we are doing.

  Q74  Chairman: So you think the model is basically not broken? The distinction between the Worker Consumer Directive and trading standards, which I think I understand, is a valid one. The local delivery of trading standards is a valid approach but there may be issues around the resources available to do it?

  Lord Whitty: Yes, there are issues about the structure of it and whether there should be regional provision, but essentially that is a resource issue and the new organisation does not have a view as to whether they should continue to be local authority based or regionally based. That is a continuing argument, but my concern is that there are adequate resources deployed locally and any threat to that would be of concern to us.

  Q75  Chairman: Often the sharpest and hardest consumer issues are ones that trading standards departments have to address. Consumer safety, for example, is an essential part of the consumer's rights.

  Lord Whitty: Absolutely.

  Q76  Chairman: Trading standards departments always measure things. They do weights and measures as well. In moving to a principle-based system would that pose particular challenges for changing the mindset of officers in the trading standards departments?

  Lord Whitty: I think that is part of the change that Ed was referring to. The old FCC did some useful work on weights and measures. It is just the case that most consumers did not understand either that they existed or that they were of use to them. Principle-based legislation properly enforced by trading standards would not necessarily mean the whole range of minutiae of weights and measures would continue to exist in that form. It does require both consumer information to be adequate and trading standards officers to be able to enforce and be trained and directed to resource principle-based legislation in that field.

  Q77  Mr Binley: Trading standards operated by local authorities are massively under cash pressure. Are you keeping an eye on whether trading standards is not suffering as a result of that especially and whether we are maintaining at local level that resource that is so vital to consumers?

  Lord Whitty: That was the reason for my earlier comments.

  Q78  Mr Binley: I thought so.

  Lord Whitty: There are no very up-to-date figures but the feedback from some trading standards operations is that their areas are being squeezed, for one reason or another, so we will continue to keep a close eye on that and raise it with Government.

  Q79  Chairman: There was a note of urgency in your voice as you said that and I was slightly concerned by that because trading standards work is tremendously important. It may well be this Committee should take some views from representatives of the trading standards sector and see what they feel about all this.

  Lord Whitty: I think that would be sensible.

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