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House of Commons, 7 Millbank, PN 2008-09 (4) 10 March 2009 Trading
Standards Institute Response to 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 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"[1]. 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. 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"[4]. 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'[5] 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 5 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 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 2007/2008, 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 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) 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. The challenge to all is immense if trading
standards professionals are to realise in full their undoubted potential to
help ensure that the 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."[8]
(v) 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 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 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 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 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[10],
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 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..."[11]. 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, e.g. 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.
[1] TSI Call for Evidence - Consumer Law Review July 2008 [2] Modern markets: confident consumers, The Government's Consumer White Paper, 1999, pp.52-55 [3] Modern markets: confident consumers, The Government's Consumer White Paper, 1999, pp.52-55 [4] http://www.audit-commission.gov.uk/caa/ [5] http://www.audit-commission.gov.uk/caa/background.asp [6] A Bill for Better Regulation: Consultation Document, Better Regulation Executive (BRE), July 2005 [7] Cabinet Office press release, Transforming the Regulatory Landscape - Launch of the Better Regulation Bill Consultation, July 2005 [8] FSB Inhibiting
[9] Davidson Review: Implementation of EU legislation, Final Report, November 2006, P.3. [10] The Good Guidance Guide - taking the uncertainty out of regulation, SarahAnderson, January 2009 [11] The Good Guidance Guide - taking the uncertainty out of regulation, SarahAnderson, January 2009
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