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1. Introduction
1.1. Citizens Advice is the national body for
Citizens Advice Bureaux (CABx) in England, Wales and Northern Ireland. The CAB
service is the largest independent network of free advice centres in Europe,
with 430 main bureaux in England, Wales and Northern Ireland. Bureaux provide advice from over 3,300
outlets, including bureaux in the high street, community centres, health
settings, courts and prisons.
1.2. The CAB service aims are to provide the advice people need for the problems they face, and to improve the policies and practices that affect people's lives.
1.3. In 2007/8 Citizens Advice in England & Wales helped 1.9 million people to deal with more than 5.5 million issues, including
§ 1.7m debt issues, including mortgage arrears and credit problems, and 115,000 financial products and services issues § 476,000 employment issues § 399,000 housing issues § 130,000 consumer goods and services issues, 95,000 utilities and communications issues and 38,000 travel, transport and holiday issues. § 274,000 legal issues
1.4. Citizens Advice welcomes this timely opportunity to submit evidence to the Regulatory Reform Committee's inquiry on Themes and Trends in Regulatory Reform. In our policy and advice work, we see the impact of different regulators' methods of regulation and the effectiveness of these methods. The regulators we have most experience of include:
§ the Office of Fair Trading (OFT) § the Financial Services Authority (FSA) § Trading Standards § Ofgem § Ofcom § Phonepayplus § Ofwat § The Gangmasters Licensing Authority (GLA) § The Employment Agency Standards Inspectorate § The Ministry of Justice's Claims Management Regulation § The Solicitors Regulatory Authority § HMRC's enforcement of the National Minimum Wage
1.5. Citizens Advice is, therefore, able to offer a unique perspective on how consumers and employees in particular are affected by regulation and how the consumer experience in one area may vary widely from another. Based on this experience, Citizens Advice believes that regulation to date, whether principles-based or rules-based, has not understood and protected consumers and employees sufficiently.
1.6. This submission will cover the following areas:
§ Regulation and the current economic climate § Different models of regulation and how these work in practice § What elements contribute to effective regulation § The design of regulations
2. The current economic climate and regulation
2.1. The consequences of the current crisis in global financial markets are now being seen by Citizens Advice Bureaux. Between April 2008 and January 2009 the number of enquiries relating to unemployment and difficulties meeting basic living expenses has risen sharply. In this period:
§ Enquiries about redundancy increased by 153 per cent § Enquiries about jobseekers allowance, the benefit for people who have lost their job and are now seeking work, increased by 138 per cent § Enquiries about mortgage and secured loan arrears increased by 49 per cent § Enquiries about council tax debts increased by 23 per cent
2.2. Much has been said about the link between the causes of the current economic downturn to regulatory failures in the financial services sector. Citizens Advice does not have the expertise to comment on this directly but we believe this link raises a key point that should be a starting point for any current debate about regulation, namely that there can be significant negative consequences resulting from regulatory failure.
2.3. While this seems fairly obvious now, it is not at all clear that the 'pre-credit crunch' discourse on regulation was sufficiently concerned with what outcomes regulation should be trying to achieve or indeed the consequences of failing to meet these objectives. A summary of this (in respect of financial services regulation) is given by Lord Turner in recent evidence to the Treasury Committee. The uncorrected transcript quotes Lord Turner as stating how the Financial Services Authority had carried out 'competent execution of a style of regulation and a philosophy of regulation which was, in retrospect, mistaken'[2].
2.4. Furthermore, Lord Turner then described this style of regulation as arising from 'a political philosophy where all the pressure on the FSA was not to say: "Are you looking more closely at these business models?" but to say: "Why are you being so heavy and intrusive? Can you not make your regulation a bit more light touch?"'. From our perspective as an advice charity that is intimately concerned with the day to day problems that consumers actually face, we would argue that this is not only true of regulation of financial markets by the FSA but could be applied to the prevailing discourse on regulation more generally.
2.5. We have got very used to hearing phrases such as 'light touch', 'regulatory burden' and 'red tape' as the touchstones for debates about regulation. But the underlying concern of this philosophy - to let business get on with it - seemed increasingly at odds with our experience of consumers suffering often severe detriment from bad practice across a broad spectrum of goods and services markets. It is important to note that it is not just small 'rogue' traders that are responsible for this consumer detriment. Many, if not most, of the problems CAB clients face are with high street brands and household names. CAB evidence shows again and again how unfair and detrimental practices can become common, even ingrained, where regulatory standards do not exist, are weak or are poorly enforced by regulators. For example:
A Norfolk CAB reported that a woman had contacted Trading Standards about a plumber she had found in Yellow Pages. They insisted she pay £500 as cash for a job they priced at £1,175 before they did the work and then failed to turn up as promised. As the cesspit was blocked she had to find another trader to do the job. The trader offered a part refund then failed to deliver. Trading Standards explained that whilst they could act to stop the unfair practice for future consumers, they could not enforce the promised repayment.
A Surrey CAB reported that a woman had paid a trader up front for removals. He failed to turn up to do the job and she had been unable to get her money returned. It would appear he had gone into liquidation, and she could not trace him. The bureau was concerned that, in addition to regulation, consumers needed to be warned about such cases whenever enforcers became aware of them.
A CAB client in Gloucestershire was told she had won gym membership but was told there would be a maintenance fee. Verbally the gym said she could cancel the direct debit for payments and given a cut off date. She did cancel but found the credit provider whose agreement she found she had signed threatened to damage her credit record if she didn't pay up. The local Trading Standards were already aware of this gym but had not acted, presumably whilst a proportionate level of cases are built up.
2.6. For instance, the CAB service sees a continual stream of problems arising from bad practice in the mobile phones market. The following case highlights problems with mobile phone retailers, who we believe are not subject to effective regulation, despite this being a significant consumer market.
A CAB in
2.7. Another example comes from the banking sector where we continue to see cases of banks exercising their right of set off in a way that can cause extreme hardship to lower income households. The right of set off is an ancient banking practice where a bank will take money from a customer's current account to meet payments of other credit contracts that the consumer has with the bank. As the following cases show, this can mean that the bank takes income that is needed for essential living expenses.
A CAB in
A CAB in Greater Manchester saw a 25 year old man who had two accounts with the same bank - a current account that was overdrawn and a 'cash card' account which was used solely for receipt of housing benefit and payment of his rent. But as the housing benefit was deposited into the cash card account, the Bank took the funds to pay off the overdraft leaving him unable to pay his rent. Only when the CAB intervened did the bank reverse the transaction.
2.8. The point here is that both regulatory guidance from the Office of Fair Trading (the Debt Collection Guidance) and industry self regulation (through the Banking Code) put nominal controls on the practice of set off. But firms do not necessarily comply with the standards, to the detriment of often vulnerable consumers.
2.9. With this background of uncontrolled consumer detriment in mind, our immediate concern is that the current economic conditions will produce many more examples of bad practice.
2.10. Firstly, consumers facing uncertain futures or actual financial hardship may be particularly vulnerable to unfair practices and scams. Unfortunately CAB evidence highlights numerous cases of traders seeking to take advantage of these vulnerabilities in a variety of ways. A CAB in A CAB in Hertfordshire saw a 38 year old man who had debt problems. He had approached a debt management company about getting an individual voluntary arrangement (IVA) to deal with his debts. The firm advised that he needed to offer £300 per month if his five creditors were to agree to an IVA. He told the firm that he could not afford this, but they told him to pay for a couple of months then he could renegotiate downwards. He managed to pay for two months but then defaulted for several months. The IVA provider then told him that if he paid for two more months they would renegotiate. The man's new partner agreed to pay £600 for him. But once the firm had received the money they wrote to the man to say that they would no longer represent him and were keeping the £600 in respect of their admin charges. A CAB in Northumberland
reported that a man had seen an advert in his local paper from a company who
claimed that they could wipe out any loans or credit cards if he signed the
agreement before
2.11. Secondly, as falling incomes and prices put the squeeze on both consumers and businesses, there is a danger that 'good' firms that are properly concerned with the way they treat their customers will be undercut by less scrupulous rivals. In other words there is a danger that good business practices will be undercut by bad practices.
2.12. One example of this comes from the bailiff industry, where a number of bailiff firms have agreed with Citizens Advice in calling for independent regulation of private bailiffs. In part this is because the bailiff sector has long been associated with some very bad practices, which more enlightened firms would like to see cleaned up. But in addition, it is argued that intense competition between bailiff firms for the enforcement business of large creditors (such as local authority council tax debt) can give incentives to firms to maximise the possible revenue from the cases they receive. As these cases may often involve low income and vulnerable households in severe financial difficulties, the potential for bad enforcement practices is clear.
A CAB in the
A Sussex CAB reported that a man who was unable to work due to illness, left his home locally and went to live with his parents for six months whilst he recovered. On his return home, he found a bailiff's distress warrant for non-payment of council tax taped to his door. As the client was now able to work and repay the bailiffs, he offered them an initial payment of £500 in a week's time, a second payment of £500 the following month and the balance in April. However, the bailiff he spoke to insisted on full immediate payment. The bailiff also alleged he could legally break into the house to levy goods. Although this was incorrect, when the client complained to the bailiff company, they backed up what their bailiff had told the client. The client subsequently complained to the local authority who said that they would not take back the case from the bailiffs, and that although the client could make a complaint about the intimidation from the bailiffs, they would take no action on it.
2.13. Another example is the sale and rent back sector (SARB). This is a type of transaction where homeowners, usually facing mortgage possession action or other severe debt problems, sell their home at a discount to market value to a firm that allows them to remain in occupation as a tenant. As this was an unregulated sector, any firm could set themselves up as a SARB provider with little on no safeguards for consumers. Perhaps as a result, as the number of people seeking advice about mortgage arrears began to grow from around 2005 onwards, bureaux also began to see cases of homeowners who had suffered severe detriment as a result of entering into SARB agreements. Around this time we spoke to several firms in the sector who were keen to establish a framework of regulation, either voluntary or statutory, that would create standards and help consumers to distinguish legitimate traders from the rogues.
A CAB in
A CAB in
2.14. These two examples demonstrate that effective regulation requires a swift and effective response from government to evidence of problems in the market. As a result of concerns raised by Citizens Advice and others about the SARB sector, the government announced in the 2008 Budget report that the OFT would carry out a market study of the SARB sector. This was duly done by the OFT with impressive urgency, with the resulting report published in October 2008 recommending that the government bring the SARB sector under regulation by the FSA. In February this year both HM Treasury and the FSA issued consultations on the detail of how regulation might be brought forward. Indeed the FSA are proposing to introduce an interim regulatory framework in July 2009. This strikes us as an efficient and timely response to an area of severe consumer detriment.
2.15. In contrast, progress on bailiff regulation has been extremely slow. The Ministry of Justice (then Department for Constitutional Affairs) announced its intention to regulate bailiffs in the 2003 White Paper, Effective enforcement. However these plans were then put on hold before being revived during the passing of the Tribunal, Courts and Enforcement Act 2007. Widespread concern over provisions in that Act that would give bailiffs wider forced entry powers lead to the Ministry of Justice (MoJ) announcing in March 2007 that these powers would not be commenced until 'those bailiffs who are not Crown employees are licensed by an independent regulator'. MoJ had launched a consultation on the detail of bailiff regulation in January 2007 but did not publish a response confirming its intention to proceed with this until March 2008. Since then there has been no further publicly visible progress towards bailiff regulation. Six years on from Effective enforcement, regulation of a sector that has repeatedly thrown up cases of severe consumer detriment looks very remote despite always unanimous agreement on the need for this from stakeholders and MoJ itself.
2.16. We believe that the contrast between these two examples is instructive. Effective regulation ultimately rests on the commitment of ministers to take action to safeguard the interests of consumers where evidence of detriment arisies in areas under their departmental brief. The key question would therefore seem to be why the Government's response to two different but pressing problems should be so different.
2.17. Finally, where regulators are funded through licence fees or levies on the firms they regulate, falling business turnover and reducing licence applications are likely to mean fewer resources to deal with bad practices. Perhaps an example of this is the oversight of consumer credit markets by the Office of Fair Trading. Concern over bad practice in consumer credit markets lead to parliament passing the Consumer Credit Act 2006. This updated previous legislation and granted the OFT new powers and sanctions to deal with problems in the market. However the problem of monitoring the way firms actually comply with regulatory guidance remains.
2.18. The OFT is funded to regulate consumer credit by a levy on consumer credit licence holders. We understand that an immediate effect of the current recession is a reduction in applications for consumer credit licences and we are concerned that this might well effect the ability of the OFT to carry out its regulatory functions effectively. In addition we would question whether the levy provided the OFT with sufficient resources even before the economic downturn began to bit. For instance, we understand that the levy raised from the five biggest banks amounts to only around £3,000 per year. While we fully support the need for regulation to be efficient and economic, these considerations should not undermine the need for effectiveness.
3. Different methods of regulation
3.1. There are three broad methods of regulation designed to protect consumers and employees:
§ Principles-based regulation § Prescriptive or rules-based regulation § A regulatory regime that does little other than badge firms
3.2. Firstly, principles-based regulation is where there are high-level and quite general requirements on firms to behave in a certain way. This can be backed up by guidance, which may or may not be binding. In theory, the principles-based regulation may encourage firms to focus on delivering better outcomes for consumers. Examples of principles-based regulation include:
§ The FSA's Treating Customers Fairly initiative § The Advertising Standards Authority code on advertising which follows the idea of legal, decent, honest and truthful. § The proposed method for the FSA to regulate retail banking from the end of 2009.
3.3. However, in practice, the benefits depend on how the high-level principles are translated into the everyday practices of firms. For example, how easy is it for consumers or their advisers to both understand the application of such principles and hold firms to account where they fail to adhere to them?
3.4. For example, under the FSA's proposals to regulate retail banking, the detailed rules contained in the self-regulatory Banking Code will be replaced with high level principles, backed up with voluntary guidance. The content of the current Banking Code and associated guidance for subscribers is vital for vulnerable consumers because of its specific and detailed provisions which set out what customers can expect in certain situations. This provides customers and their advisers with clarity about what is and is not permitted under the regulatory regime, thereby enabling them to assert their rights where they are infringed in any way. Removing this level of detail will have negative consequences, with consumers and their advisers unsure and unclear about whether firms are complying with high-level principles. It will also lead to conflicting interpretations of what it means to treat customers fairly since the onus is on the firm to interpret high-level principles, and any interpretation is likely to vary from firm to firm.
3.5. Under the Banking Code subscribers must comply both with the Code
itself and the Guidance that underpins them if they wish to avoid
enforcement action by the Banking Code Standards Board (
3.6. The FSA's move to high-level principles-based regulation will remove
this level of detail. The FSA proposes
that to accompany its high-level principles for regulation of retail banking
"industry may wish to develop voluntary industry guidance, suggesting ways to
comply with these requirements, which would preserve valuable elements of the
current Codes and relevant material." We
do not think that such voluntary industry guidance as currently constituted would
fulfil the same valuable function as that provided by the Banking Code guidance. This is because while the
3.7. Secondly, prescriptive or rules-based regulation sets out detailed rules that firms should follow. We believe that in many cases, regulators need to be prescriptive in telling firms what behaviour is acceptable, and what is not. In some sectors, this needs to drill down to specific practices. The OFT's Debt Collection Guidance is an effective example of this. However, we believe that if prescriptive regulation is to address consumer detriment effectively, it must be accompanied by swift and effective enforcement. For example, the national minimum wage rules are clear, and the regulator has effective enforcement powers, but there are insufficient resources to ensure universal compliance.
3.8. Finally, some regulation may operate as little more than a badging scheme, with little in the way of either high level principles or prescriptive rules. An example of this is the regulation of wheel clamping firms by the Security Industry Authority (SIA). Currently the SIA seems to do little more than issue licences on the basis of criminal record and other basic checks on applicants. Licensed firms are only required to do things: firstly, not to clamp, block or tow away vehicles with a valid disabled badge or those which are a marked emergency service vehicle, and secondly to provide a receipt which must include the location where the vehicle was clamped or towed, their own name and signature, their licence number and the date. There are no requirements in relation to the amount of fees which can be charged or the manner in which wheel clampers carry out their duties. Citizens Advice believes that this form of regulation is inadequate to tackle consumer detriment.
4. Effective and proportionate regulation
4.1. The points we have raised in the previous section highlight an inevitable and obvious tension between ensuring good standards of business practice across markets and the costs that this would entail for firms. We are conscious of the need for regulation to be proportionate and not to place any unnecessary burden on business, not least because these costs tend to get passed on to consumers in one way or another. But we believe that the 'light touch' discourse that prevailed in the recent past tended to go too far in prioritising these concerns.
4.2. The inescapable fact is that good practice does have a short-term cost attached to it. But we believe that right-thinking firms will want to ensure that their customers feel they are being treated fairly, as this is a vital indicator of the long running health of the market they are trading in. Here the current economic turmoil illustrates exactly how this long-term health can be undermined. We believe that more businesses could now go under, because some aspects of regulation were perhaps too light touch, resulting in poor and unsustainable business practices being allowed to flourish.
4.3. Citizens Advice believes that, for business as a whole to succeed, underhand business practices must be curtailed and businesses that persist in using them should be prevented from trading. We believe that this is unlikely to happen in a regulatory environment that values a 'light touch' above all else. Some of the persistent problems faced by CAB clients would seem to confirm this point. Firms should pay a price to enter into markets for consumer goods and services and that price is a commitment to best practice and the regulatory framework needed to ensure this.
4.4. Our view is that regulation should be driven by outcomes and should link to consumer detriment. As such, the objectives behind regulation should:
§ Reflect the damage and detriment caused; § have deterrent value; including asset recovery and financial sanctions when a business has gained financially as a result of failure to comply with regulation; § allow for individuals affected by the poor business practices to obtain redress. § reward and encourage good practice.
4.5. If the above serves as a high-level critique of calls for deregulation, the next step is for us to suggest some of the key features that we believe regulatory systems need to work properly in consumer facing markets.
5. Regulators must focus on outcomes
5.1. There is probably near universal agreement that regulatory regimes need to be proportionate and risk-based. However by themselves these phrases may not mean very much. In the past regulators have tended to concentrate on processes and outputs such as producing rules and guidance rather than on the effect these have on the business practices that consumers encounter.
5.2. Citizens Advice believes that regulators should be more focused on the outcomes of their regulatory frameworks. This means having effective ongoing strategies to deal with (or, better still, prevent) both specific problems and general areas of consumer detriment in a timely and effective manner.
6. Regulators must empower consumers
6.1. From a consumer advocacy perspective, Citizens Advice believes that regulatory frameworks need to properly anticipate the sort of problems consumers are likely to face. Regulators need to make sure they actively develop and regularly update their understanding of consumers' problems. This means having a clear strategy to gather evidence of consumer experience and then using this experience to review the effectiveness of regulatory frameworks. Where there are insufficient enforcement sanctions available to a regulator, they should be able to work in conjunction with any other regulator that does have the required powers to effectively address the detriment. We think this may be starting to happen with the OFT's compliance partnerships work. However, to date we believe that regulators have a patchy track record of achieving this, both in terms of the timeliness of reviews and the extent of engagement with actual consumer problems.
6.2. But beyond this it means giving consumers clear and concrete signals about the way they can expect to be treated by firms, the way regulators expect firms to behave towards them and what they should do if they feel these standards have not been met. Making this work for consumers means regulators should be consistently thinking about the following issues:
§ Are rules and guidance easily accessible for consumers, in plain language and are they talking about the problems consumers face? § How do regulators ensure that consumers understand the requirements that regulatory frameworks place on firms - does information about standards flow from regulator to firm to consumer to regulator in an even flow? § Do regulators encourage consumers to give feedback when they think a firm has not followed rules or guidance? How do regulators do this? § How well do regulators communicate the outcomes of consumer feedback or complaints about firms? § Are regulators providing sufficient information about their investigations to consumers in a timely and effective way? Doing so would alert consumers to any potential pitfalls when dealing with a business and ensure that consumers are able to engage with and contribute to a regulator's investigation.
7. The need to get firms to do more to demonstrate compliance
7.1. We believe that ensuring compliance with rules, guidance and practice standards is one of the most significant weaknesses with the regulation of consumer facing markets. Policy makers can produce fantastic regulatory frameworks that will be completely ineffective to deal with substantial non compliance. However even well resourced regulators may find it difficult to monitor the entire range of firms they regulate at any one time. While this can be in part remedied by developing risk based regulation models, such models may involve unfortunate trade offs between competing sources of possible consumer detriment. Worse still, risk based models may incentivise regulators to concentrate on the 'low hanging fruit', for instance by prioritising action against small local traders rather than large firms because it is easier to get a result.
7.2. We believe regulators need to do more to encourage firms to demonstrate how they will adapt rules, guidance and standards to their business practices. More specifically we believe that regulators need to do more to ensure that firms communicate this to consumers. If firms are sufficiently transparent about how their practices comply with regulatory standards, then every consumer and consumer adviser can help regulators to monitor compliance.
8. Joint regulatory action
8.1. Activities that require regulatory attention do not always fall neatly into the regime of one regulator. For example the same salesman may sell a package of products which are regulated by different regulators. . For example, the sale of legal services may include the sale of a linked credit agreement. When rogue traders act fraudulently, for example in scam lotteries, they can potentially cross the remits of several regulators. To ensure that all regulatory angles are addressed, we would like to see more effective joint working between regulators so that:
§ Regulators discuss who can do what to tackle the problem fully. § Regulatory action can be taken by more than one regulator against the same offender at the same time and in a proportionate fashion, saving the need for two separate investigations. § Where there are self-regulatory paths that
tackle the problem identified and deliver a real sanction, these are also
considered as well. For example, under
the Consumer, Estate Agents and Redress Act there are legal requirements for
estate agents, fuel companies, and postal companies to belong to an ADR
provision and some providers are achieving this through trade association
membership where a code of practice includes a § Detriment to those affected can be reflected using all the available powers or sanctions.
8.2. A good example of how Government can ensure more effective joint regulatory action can be seen through its current efforts, led by BERR, to ensure that the various workplace rights enforcement bodies work together more effectively.
9. Resourcing enforcement action
9.1. Enforcement action needs to be properly resourced. However, not all types of regulation appear to receive sufficient (or indeed any) income to resource enforcement. Economic regulators such as OFGEM, OFCOM and FSA are funded through a levy from all the businesses in the sector. Other regulators, such as the OFT, .charge a licence fee. However, as we have highlighted earlier in our submission, the OFT only charges a small licence fee, even for large multi-national companies. It is unclear whether this fee covers more than just the administrative cost of issuing the licence.
9.2. Under the Consumer Protection from Unfair Trading Regulations (CPRs), a wide range of businesses not connected with a licensing regime are also regulated by the OFT. As there is no requirement for a licence to trade, the mechanism to charge for policing the business is not available.
9.3. Trading Standards and Environmental Health Departments have historically had little or no access to business funding for the regulation they deliver. Both are expected to carry out functions across many pieces of legislation from the money provided by their local authority employers. Whilst the Government helps fund local authorities, most of their income is raised through local taxation. Consequently, if regulators do not have the resources to take action, consumer detriment will continue unchecked. As such, we believe that it is important to build in automatic redress for consumers, so that there is a greater incentive for firms to abide by the rules.
9.4. In this respect, the . 10. Available regulatory sanctions
10.1. We believe that regulators enforcing compliance need the most appropriate enforcement tools and sanctions to do their job well. The Regulatory, Enforcement & Sanctions Act 2008 provides a range of tools for regulators and enforcers. The idea is that the tool chosen reflects the seriousness of the breach of regulation or legislation. Much the same approach has been taken to the transposition of the EU Unfair Commercial Practices Directive into UK legislation. The UK Government retained the criminal sanctions of the original legislation that the new law replaced for use in the worst cases. Civil sanctions of undertakings and injunctions are also available where these would be more appropriate. These are quicker and cheaper, but need a backstop threat of the heftier criminal sanction to ensure compliance with the law.
10.2. Economic regulators such as OFGEM and OFCOM have licence conditions to ensure that utility companies act fairly in their dealings with consumers. Where these licence conditions are breached, the regulator can take action against that business. Commonly, the relevant EU Directives for consumer protection have included economic regulators as enforcers, as well as Trading Standards and the OFT. OFGEM could therefore use either the Distance Selling Regulations or the licence condition on sales to tackle poor tele-selling. Having this option allows the regulator to choose the most appropriate sanction.
11. Design of new regulation
11.1. From what we have previously outlined, it would be easy to argue that the mindset behind regulation to date, together with the current economic climate, shows that the Government and regulators have not understood business well enough. What we would argue, however, is that the Government and regulators need to better understand consumers and employees more effectively and ensure that business works for them, through improved protections for example.
11.2. For
example, employment regulations (i.e. those governing the workplace rights of
workers) can sometimes be unduly complex and, in many cases, little if any
thought appears to have been given to how such undue complexity will impact on
compliance and enforcement. One notable
example is the not-yet-implemented provisions in sections 3 to 10 of the Work
& Families Act 2006, under which up to 6 months of statutory maternity
leave (and pay) can be transferred from the mother to the father.
11.3. The Regulations governing these provisions will be extremely complicated, given that in the vast majority of cases the process will involve not one but two employers (both the mother's and the father's), who will need to liaise to ensure, for example, that the mother has returned to work before the father begins his leave. At the time these provisions were proposed, in 2005, we noted that this complexity will "intensify the already significant compliance challenge for employers - and especially for small employers in low-profitability sectors of the economy" (in Hard labour: making maternity and paternity rights at work a reality for all, Citizens Advice, November 2005). Workers will only be able to enforce these rights by bringing an employment tribunal claim, but of course the time surrounding childbirth is a very challenging time and, as we noted in Hard labour, pregnant women, new and lone parents are very unlikely to bring an employment tribunal claim. In contrast, the Government established a whole new compliance and enforcement regime to go with the National Minimum Wage in 1999, with the NMW being proactively enforced by HMRC.
[1] Financial Overcommitment, research study conducted for Citizens Advice by MORI, July 2003 [2] Uncorrected oral evidence taken
before Treasury Committee on |