Memorandum submitted by the Trading Standards
Institute
The committee will consider how aspects of the
regulatory reform agenda are evolving; possible improvements to
the design of new regulations; and whether reform initiatives
are currently achieving intended benefits
FOREWORD
Trading standards and the Trading Standards
Institute have always considered themselves to be champions of
good regulation; we support Regulatory Reform where it is focussed
on delivering pragmatic and productive solutions to shared better
regulation objectives that work in the best interests of both
businesses and consumers. We want trading standards to be a world-class
profession and public service and sustain our view, shared by
Sir Philip Hampton for a Trading Standards champion in Whitehall.
Trading standards and TSI are advocates of good
regulation because of trading standards familiarity with the crucial
and fundamental role of consumer and business confidence being
abridged in sustaining economic progression.
Trading Standards is a bridge between consumers
and business; we want to ensure that public services and capacity
is not burdened disproportionately, is recognised as part of the
solution and not a burden and at the same time it is critically
important that business is freed up to survive and prosper. We
are all in the business of wealth and health creation and restoration,
whether as regulator, business or consumer.
Nonetheless the Government must remain conscious
that the "law of unintended consequences" sometimes
rules; Regulatory Reform could have the opposite effect and increase
burdens upon businesses and regulators as has been seen in the
past under the Deregulation and Contracting Out Act 1994 and
the Government's subsequent efforts to legally codify good regulatory
practice in 1997. Regulatory Reform could adversely affect the
consumer and the implication still stands that where there is
too much emphasis on businesses accruing burdens "from necessary
enforcement of consumer legislation", there is a "lack
of recognition of the need to protect consumers and provide benefit
for them which in turn drives a strong prosperous economic environment".[4]
It follows that if value is not given to the
concept that consumer confidence regenerates markets, then businesses
will have more to worry about than the burdens of regulation.
The balance between business burdens and consumers is a preoccupation
for BERR, Trading Standards and many others. Fundamentally it
might be argued that any burden is always on the consumer, not
the business, because it is the consumer who pays in the end.
If overall benefit, is in the Government's sights,
rather than the reduction and removal of "burden", then
this clear outcome-focus will produce efficiency and will enable
a responsive approach to the economic climate, improving the conditions
for business success and economic progression whilst providing
consumers with the necessary benefits and protections.
1. (i) What are the implications of recent
economic developments (for example, the economic downturn; credit
crunch and problems with the financial sector) for the design
and delivery of the regulatory reform agenda, including risk-based
regulation?
Regulation of the financial sector necessarily
translates across to the wider regulatory spectrum but what we
do see is perhaps a little more balance being introduced into
the discussion between light-touch regulation and appropriate/proportionate
legislation. In a sense from our point of view, we have always
felt that regulation should be risk-based and we have always wanted
a discussion on the Regulatory Agenda. With the financial crisis
there are undoubtedly parallels that need to be drawn and lesson
learned in relation to areas where good regulation exists and
is beneficial both to consumers and business.
In our experience, business likes certainty
and it likes to be the beneficiary of good compliance advice.
When Philip Hampton suggested that there should not be inspection
without justification; we agree. We always think there should
be productive transactions between the regulator and business,
but we do not want to see business, especially small and medium
business, robbed of their opportunity to benefit from good compliance
advice or the opportunity to share concerns and possible solutions
with the regulator.
Hampton recommended the organisation of a Consumer
and Trading Standards Agency (CTSA), recognising that trading
standards services needed support. In "Modern Markets: Confident
Consumers"[5]
the strengths of trading standards services were identified as
the operation at local level, and the proximity of the service
to the issues of real concern to consumers and business. It noted
the pressures faced by trading standards services and responded
in recognising that the challenge "is to find ways of combining
the advantages of local presence with the need for co-operation
and consistency".[6]
They envisaged that the CTSA would bring about that co-ordination
at the local level.
A positive Hampton measure, encouraging compliance
by business, is the "incentives" proposal, which has
lead to a number of awards supported and jointly badged by the
Trading Standards Institute; Food Champion Award; Innovator in
Animal Welfare Award; and Fair Trading Award, which this year,
will be aligned with BERRs "Know Your Rights" campaign.
The "Know Your Rights" message will also be reinforced
during our National Consumer Week.
Within the trading standards service there are
the Local Authority Approved Trader schemes that give consumers
the certainty of Trading Standards approved Traders who guarantee
to provide a reliable and quality service and sets a standards
benchmark for tradespersons. Not only does this show commitment
by businesses to trade fairly and honestly but also a commitment
from trading standards to support business.
Of benefit to the consumer—trading standards
operates the Young Consumers of the Year Award and Playsafe project,
competitions run by TSI that are designed to educate young people
and generate awareness of their responsibilities as well as their
rights; the Local Hero's Award, a nationally recognised award
scheme administered by the Trading Standards Institute to celebrate
outstanding local contributions to consumer protection and the
protection of individuals. These competitions are designed to
interest the public, across all age ranges, in consumer affairs
and to raise awareness of consumer issues.
(ii) How does the Government balance the need
for an effective regulatory framework, providing the necessary
benefits and protections, with the commitment to improve the conditions
for business success?
We feel that government should be focused upon
outcomes for consumers; they are responsible for markets working
well backed up by a robust and where necessary light touch to
regulation. Good regulation needs to be streamlined for good business
and enforcement to ensure the swift and effective action against
rogue businesses that harm the collective of consumers and businesses.
The framework needs to be joined up through partnership working
and more effort should be placed upon "joined up" government
as is expected of local authorities.
Comprehensive area assessment is the way in
which local government's effectiveness is to be measured in delivering
local people's priorities through local partnerships. The expectation
is to bring forth a "new era of public sector partnership
working".[7]
The Comprehensive Area Agreement framework, developed from the
White Paper "Strong and Prosperous Communities", aims
to improve the co-ordination and targeting of inspection and assessment.
The Government are working towards "a truly joint assessment"[8]
hence the inspectorates have been working with stakeholders to
determine the final CAA framework. Trading Standards applauds
this approach and anticipates this as the way in which the Government
can balance a commitment to improve the conditions for business
success and provide the necessary benefits and protections within
an effective regulatory framework.
One of the most challenging aspects of the regulatory
framework is in trying to apply it to some issues that cause consumer
harm, but that don't easily fit within existing legislation. Recent
examples include:
— Mobile phone cash-back deals.
— Ticket sales and resales.
— Misleading broadband speeds.
The implementation of the Unfair Commercial
Practices Directive through the Consumer Protection Regulations
and Business Protection Regulations create a more flexible framework
and provide more scope for dealing with "deliberate wrong-doing".
The regulatory framework itself does not restrict
the effectiveness of enforcement on the Internet. The effectiveness
of enforcement on the internet is challenged by the very different
market place that exists on the internet, with low start up costs
and barriers, and correspondingly large number of small businesses.
Very few of these businesses seek advice on the legal obligations
as the OFTs Market Study of Internet Shopping identified. This
could be addressed through increased enforcement activity being
directed to this medium but to do so would be at the cost of other
TSS responsibilities.
It should be recognised that much effort is
going into developing intelligence-led working methods in order
to ensure that trading standards services are able to target their
resources at the areas causing most harm. However, intelligence—led
working methods cost and take time to develop and implement. There
is a clear need to support the development of intelligence-led
working practices at a local level, to link with the regional
and national developments.
(iii) How might a proportionate and targeted
response to improving the regulatory framework in the wake of
the financial crisis be made? What lessons are there for the wide
regulatory reform agenda?
Proportionality and responsiveness are elements
that trading standards and regulatory services have long been
charged with. Successive reviews and initiatives have targeted
these services to tackle concerns that have been raised through
businesses. The disappointment is that these principles well tested
and implemented have not been utilised by other regulators across
government. Regulatory reform from our perspective has progressed
well over the last five years, delivering lighter touch regulation,
a move to principles based legislation and reinforcing the sanctions
regime to tackle abuses in the marketplace. It would seem the
same measures were not applied to the financial industry.
The Better Regulation Executive's consultation
document calling for a response to "A Bill for Better Regulation"
covered Hampton and the proposed reform/repeal of the Regulatory
Reform Act 2001.[9]
It aimed to accelerate the Better Regulation Agenda by facilitating
a more efficient implementation of measures to remove unnecessary
burdens on business. The backbone of this was the Hampton Review
and the Better Regulation Task Force "Less is More"
report both of which mapped out a radical agenda for better regulation
that the Government fully accepted. Underpinning the Bill were
the values of the Government's Regulatory Reform Agenda based
on Hampton—"to create a new radical risk-based approach
to inspection that shifts resources away from routine inspection
for businesses in safer areas with a proven track record, towards
businesses in higher risk areas and rogue traders. It will enable
the merging of inspectorates and cut down on repeat requests for
information from inspectors who could be pooling their resources".[10]
The November 2006 BRE document "Implementing
Hampton from enforcement to compliance"—evaluated to
date the recommendations implemented. It noted that one of the
aims of Hampton, the merging of inspectorates and pooling of resources
had been carried out successfully , through the Retail Enforcement
Pilot, which co-ordinated local authority inspectors covering
trading standards, environmental health, food safety, health and
safety, fire services, licensing so that a more risk-based approach
was taken. 40,000 businesses in the two pilot areas of Bexley
and Warwickshire by the end of 2006 had seen a 33% reduction
in routine inspections. During 2007-08, 45 local authorities
were tested under the Retail Enforcement Pilot and if successful,
the pilot will be further rolled-out.
Recommendation 12 of the Hampton Review
proposed an extension to the Code of Good Practice for inspection
and enforcement. Greater weight was placed on risk-assessment
than the long-standing Enforcement Concordat and an extension
was suggested to incorporate not only local but national regulators
too. On BREs consideration of implementing the Hampton principles
through a further developed version of the Enforcement Concordat,
the question was posed—should the Enforcement Concordat
be put on a statutory basis?
TSI regarded the Enforcement Concordat a good
example of effective voluntary cooperation and best practice and
supported the Government's decision, in 1997, to effect and support,
best practice and proportionality by way of introducing the Concordat.
Trading standards services had already developed relationships
that had created a culture of modern regulation; the Enforcement
Concordat materialised from this. In this respect TSI saw that
there would be no added value in the statutory enshrinement of
the Concordat but valued the plan to update and develop it. With
this TSI recommended the revival of efforts by central government
to secure wide-scale signing up of trading standards and local
authorities followed by transparent implementation.
Initially the Cabinet Office's robust efforts
to support the Concordat picked up great momentum but this declined
and deteriorated once DTI small business service assumed responsibility.
At present the Enforcement Concordat has not yet been updated
but is due to be brought in line with the updated statutory Code
of Practice for Regulators which came into force under the Legislative
and Regulatory Reform Code of Practice (Appointed Day) Order 2007.
As a product of the Regulatory Reform Agenda, and an improved
culture, emphasising proportionality and flexibility in regulation
and enforcement, the code should facilitate and encourage economic
progress.
(iv) How could the Government improve its
"capability" to regulate in a proportionate and effective
manner?
The building blocks have been put into place
through piloting of differing systems in the regulatory services
arena. These pilot projects need to be sustained, rather than
left to wither and die. Specifically support to trading standards
can be achieved through continuing to support regional and national
co-ordination and partnerships. It is time for a new and special
relationship to be established with the OFT. We need to be partners
in helping to establish the green shoots of economic recovery
and in delivering markets that really do work well for consumers.
UK consumers want a new level of protection and, if confidence
is to return, we must together be a catalyst for that new confidence.
The country needs a new coherence in the central/local dynamic.
The challenge to all is immense if trading standards
professionals are to realise in full their undoubted potential
to help ensure that the UK's competition and consumer framework
are amongst the best in the world. The challenge is a local and
a global one and transcends normal boundaries because consumer
transactions no longer confirm to conventional boundaries. Scams
originating from around the globe and targeted at UK average and
vulnerable consumers (Think Jessica campaign) together with the
rapidly growing dependence on on-line shopping demonstrates the
point. With UK on-line retailing now being nearly 20% of the market
we can expect to see a growth to between 30-50% in the next five
years. The OFT market study on Internet Shopping reported that
retail sales in 2006 were £10.9 billion, forecast
to nearly triple to £29.1 billion by 2011. Research
from the Centre for Economics and Business Research was quoted
predicting that online sales could comprise 40% of all retail
sales by 2020, at a value of equivalent to £162 billion.
How will this be regulated? We need to ensure trading standards
deliver a world-class public service, we champion good regulation
but it is critically important that business is freed up to survive
and that the burden on the public purse is relieved.
The Federation of Small Businesses (FSB) released
a report from a survey carried out in 2008 on the impact
of crimes against business, the focus of which was on the increase
of fraud and online crime affecting small businesses. The report
"FSB Inhibiting Enterprise—Fraud and Online Crime Against
Small Businesses" stated that "a significant 54% of
businesses have been a victim of fraud or online crime in the
last 12 months….1/3 of businesses currently do
not report fraud or online crime to the police or banks, 23% believe
that it would not achieve anything."[11]
(v) Whether there is a coherent package
of regulatory measures for improving the conditions for business
success; and how regulatory reform initiatives fit into wider
Government support
We sometimes think that Government feels that
business will always want principle based legislation rather than
more prescribed legislation. Indeed business itself will often
say this but actually we are not always sure this is the best
tool in assisting business to comply with regulatory requirements.
In our experience business likes the idea of
principle—based legislation but in practise, want the certainty
of prescribed legislation. EU and International enforcement collaboration
has to achieve new heights to achieve acceptable levels of compliance
activity underpinning legitimate UK on-line commerce. TSI is an
advocate of co-regulation and wants to see a balanced approach
to statutory and self-regulation in the UK and EU. The IMRG Isis
model is an example of industry self-regulation, which TSI supports,
but it requires globalisation in contributing to a global and
fair e commerce market. Modern UK, EU and global markets require
an innovative and principles based co-regulatory approach.
TSI is an advocate of a proportionate matrix
between principles based legislation and prescriptive law. We
demonstrated this in our TSI and wider Trading Standards approach
to Unfair Commercial Practises Directive transposition. Equally
we have seen business bemused by such an approach when the DTI,
as it then was, transposed the EU Personal Protective Equipment
Directive into UK law by way of the "copying-out" approach.
The Initiative illustrated that the UK business community and
judiciary remains some way from being entirely comfortable with
law based on principles and subject then to interpretive application
by the sector itself as well as by those seeking a consistent
level of application and compliance. The Consumer Protection Regulations
are perhaps a hybrid of principles and prescriptive based legislation
and that model may provide a helpful indicator to forward direction
when sufficient passage has been allowed to permit assessment.
The Davidson Review contributed to the Regulatory
Reform Agenda by looking at over-implementation of EU legislation.
The stock of EU sourced legislation (up to the November 2006 report)
was examined to uncover the possibility of reducing unnecessary
regulatory burdens or simplifying the system. Lord Davidson concluded
that there is a benefit to maintaining regulatory standards in
the UK which exceed minimum requirements of European legislation.
TSI supports this statement and reflects that it is not correct
to presume that over-implementation results in unnecessary burden
and that in relation to consumer protection, the consumer perspective
is completely ignored. The European Directive on Unfair Commercial
Practices is a maximum harmonisation Directive that creates a
civil regime for the control of commercial practises affecting
consumers. If the UK were to adopt the Directive and repeal all
legislation, potentially affected consumers would suddenly be
exposed to commercial practices that have been illegal for up
to forty years. This would have the unfortunate consequence that
the Police and Criminal Evidence Act, the Regulation of Investigatory
Practices Act and the Proceeds of Crime Act would have no application
in such cases, leaving the rogue traders with much greater scope
to increase their ill-gotten profits.
Lord Davidson's recommendation 5, relating to
the Consumer Sales Directive, was that DTI (as it was then) should
implement a simplified system of consumer remedies by the end
of 2009. Has that happened to date, or is there a delay due to
European Commission's review of the Consumer Acquis and its laboured
implementation? Lord Davidson was convinced that implementing
his reforms "would ensure the UK has one of the most robust
systems in the EU for implementing European legislation in the
least burdensome way possible while maintaining the necessary
regulatory protections".[12]
The implementation of Unfair Commercial Practices Regulation is
a reasonably good example of the UK implementing principle-based
legislation but with a degree of prescription that possibly strikes
the right balance.
DESIGN OF
NEW REGULATIONS
2. (i) Does Government understand business
sufficiently to design effective regulations? Is sufficient emphasis
given to small businesses and competition issues?
We don't believe that there is sufficient understanding
of business within government to effectively design regulations.
Equally we question the level of understanding of consumers objectives
in Government. We have seen a reluctance in the past to focus
on consumers, focusing instead solely upon businesses. We maintain
that burdens on businesses translate into burdens (and higher
prices) for consumers. To divorce the two is wrong. We have been
a strong advocate for business knowledge into the enforcement
community through "swap days" and the education of businesses
on the rights of consumers through our business training Fair
Trading Award.
The newly formed Local Better Regulation Office
commissioned a survey with the aim of examining how businesses
and consumers perceived the local authority enforcement of regulations.
The Ipsos MORI surveyed specifically the areas of trading standards,
environmental health, licensing and fire safety during the period
of mid-June to mid-July 2008. The results inform that the weakest
aspect of local authority regulatory services is the lack of business
understanding, although the service and relationship is seen as
important by businesses in the majority. The question of whether
the Government understands businesses sufficiently to design effective
regulations with sufficient emphasis given to small businesses
and competition issues, the conclusion drawn is that there is
still some way to go. Inconsistency and uncertainty are and have
become an issue; the knock-on effect is an increasing burden of
regulation on businesses. Similar findings were also identified
in the Anderson Review,[13]
where Small and Medium Enterprises (SMEs) were found to be deterred
from using Government guidance due to poor accessibility, lack
of clarity and inconsistency/uncertainty. Sarah Anderson lists
a number of recommendations including the broadening of inspectors'
skills and knowledge in order to provide best placed advice and
guidance, centred on the needs and experiences of business. Again
the culture of regulatory compliance must evolve, in the Anderson
review this is suggested through provision of sector-specific
advice.
The Anderson Review published this year, January
2009, confirms that "the impact of uncertainty is high for
business, government and citizens…more than 2/3of SMEs express
concern that the cost of regulation is disproportionate to the
size of their business…".[14]
Therefore regulation costs at a time when it should not, when
such burdens can significantly impact on the survival of a business.
It is critically important that business is freed—up, because
despite everything, we are in the business of health and wealth
creation and restoration. Future monitoring of business and consumer
satisfaction of trading standards services will be seen through
national performance indicators, an indices of performance will
be produced by this survey by BERR. NI182 will measure whether
businesses think they have been treated fairly and helpfully.
(ii) Is there sufficient consideration of
how regulations will be implemented, including an appropriate
focus on compliance and enforcement issues?
The most recent round of Capability Reviews
have been completed and those reviews demonstrate that some parts
of Government are better than others on the issue of making legislation.
From our perspective we like to see Comprehensive Regulatory Impact
Assessments which serve to indicate the cost of any new responsibility
given to Local Authorities and innovation around compliance and
enforcement incentives, eg enforcement through regional and national
trading standards groups and a focus on autonomy for compliant
businesses.
Good regulation badly implemented equals bad
regulation. Insufficient attention is often placed upon the burdens
placed upon the enforcement community to implement new legislation.
More attention in this area will reduce the burden on business
through a better flow of information using partners and through
a comprehensive competency and training programme.
There is also the issue that "Guidance"
does not always happen. Some parts of Government are better at
producing these, but effort placed upon good guidance benefits
both enforcement and business alike.
March 2009
4 TSI Call for Evidence-Consumer Law Review July 2008 Back
5
Modern markets: confident consumers, The Government's Consumer
White Paper, 1999, pp 52-55 Back
6
Modern markets: confident consumers, The Government's Consumer
White Paper, 1999, pp 52-55 Back
7
http://www.audit-commission.gov.uk/caa/ Back
8
http://www.audit-commission.gov.uk/caa/background.asp Back
9
A Bill for Better Regulation: Consultation Document, Better Regulation
Executive (BRE), July 2005 Back
10
Cabinet Office press release, Transforming the Regulatory Landscape-Launch
of the Better Regulation Bill Consultation, July 2005 Back
11
FSB Inhibiting Enterprise-Fraud and Online Crime Against Small
Businesses, February 2009. Back
12
Davidson Review: Implementation of EU legislation, Final Report,
November 2006, p 3. Back
13
The Good Guidance Guide-taking the uncertainty out of regulation,
Sarah Anderson, January 2009 Back
14
The Good Guidance Guide-taking the uncertainty out of regulation,
Sarah Anderson, January 2009 Back
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