Business, Innovation and Skills - Minutes of EvidenceHC 697

Back to Report

Oral Evidence

Taken before the Business, Innovation and Skills Committee

on Tuesday 15 October 2013

Members present:

Mr Adrian Bailey (Chair)

Mr Brian Binley

Paul Blomfield

Katy Clark

Mike Crockart

Rebecca Harris

Ann McKechin

Mr Robin Walker

Nadhim Zahawi


Examination of Witnesses

Witnesses: Gordon Ashworth, Director of Consumer and Markets Policy, Office of Fair Trading (OFT), Paul Gurowich, Legal Director within General Counsel’s office, OFT, Andy Foster, Operations and Policy Director, Trading Standards Institute (TSI), and Ivan Hancock, Trading Standards Service Manager, Association of Chief Trading Standards Officers (ACTSO), gave evidence.

Q91 Chair: Welcome, and thank you for agreeing to address the Committee today. In a moment, I will ask you to introduce yourselves for voicetranscription purposes but, before I do so, can I also welcome the Bill team, who I believe are lined up behind the speakers today? Thank you for your assistance. Please introduce yourselves, starting with you, Gordon.

Gordon Ashworth: I am Gordon Ashworth, Director of Consumer and Markets Policy at the Office of Fair Trading.

Paul Gurowich: I am Paul Gurowich, Director in the General Counsel’s office at the OFT.

Ivan Hancock: I am Ivan Hancock; I am the Trading Standards Service Manager at Dorset County Council, today representing the Association of Chief Trading Standards Officers.

Andy Foster: Good morning, everyone. I am Andy Foster; I am the Operations and Policy Director at the Trading Standards Institute.

Q92 Chair: Thanks very much. There are four of you. I will say what I say to all panels of this size: please do not feel that you all have to answer every question. There will be some questions that are specific to one member of the panel, but, if they are general questions and you feel that the issue that you might talk about has been covered by another speaker, please do not feel obliged just to repeat it.

I am just going to start with a question to the OFT on the digital issues. In your evidence, you highlight the discrepancy in the draft Bill between the available remedies for tangible and intangible digital content. Do you accept the Government’s argument that there is no right to reject intangible digital content because it "cannot be returned in any meaningful sense"?

Gordon Ashworth: I will take that question. First of all, we welcome the fact that digital content has been addressed at all, because it has long been an area of confusion and, clearly, it is only going to be a source of more confusion for consumers if the issue cannot be clarified. We would prefer to see a right to reject for intangible products. We think it is going to be difficult for consumers to understand why essentially what is the same content would give them different rights, depending on the way in which they purchased it. We understand that business will have issues with this, and one of them might be a technical issue about it just not being possible to reject, in the way that you would with a physical format.

We would prefer to see a bit more research done on this. We are not satisfied that that is not possible and, certainly, we think developments will mean that is more likely to be something that can happen. Ideally, we would like the law to say where we think business and consumers need to be in the future, rather than just reflecting perhaps where we are at the moment. We also recognise that business has some concerns that consumers might just keep the content, and it is difficult for them to understand or police what consumers are doing. We think generally, again, there is not enough evidence at the moment to suggest that is particularly a problem.

The other alternatives for consumers if they are not going to reject it are going to be a repair, which may not be particularly helpful, in this case or for lowvalue products. If it is a replacement, that depends on the content. If there is a flaw in the content somewhere, a replacement may not do the job. We recognise there are issues here. It is difficult, but we would prefer to see a right to reject, and we would like to see some more work done in this area.

Q93 Chair: Could you, for the purpose of this meeting, clarify or give an example where you think the public might have a right to reject, but currently does not?

Gordon Ashworth: If you buy a film or a DVD, or if you download a film, you are going to find yourself in a different legal position. One of the risks might be, as a consumer, if we move into the area of potential deductions for use, which could be the case if consumers have the item for a period of time; if you watch a film and you get to five minutes from the end and then there is a flaw, that would be something that would give you great concern. You effectively have lost your full enjoyment of the product. If it is a DVD, you can return or reject it. That is an issue where there is clearly a discrepancy.

The object of the Bill, as a whole and particularly in this area, is to give consumers clarity around their rights and to try to simplify the regime. Consumers are going to have to understand their rights around goods and services, and now there are new rights around digital content. If within digital content there is then a split, it makes it a little bit more challenging in terms of consumer education to get this across to them, for them to understand it. We recognise that there are issues both ways here. It is not a simple issue, by any means, but we would like to have seen some further work done to consider this.

Q94 Paul Blomfield: I wondered if I could pursue with the OFT a couple of issues in relation to unfair terms. In particular in your evidence, you suggested that clause 71 (2) and (3) provide that if a term is especially "onerous" or "unusual", it must be drawn particularly to the consumer’s attention. Your concern is that might, in practice, modify the fairness test. What do you think the risk to consumers is?

Paul Gurowich: It is fairly considerable here. This is probably the piece of the Bill we have most concerns about. What is wrong with clause 71 we would summarise in terms of it being unclear. Whatever effect it has is likely not to add anything to the law we already have and, because of those two factors, there is a risk that it will be harmful to consumers. Perhaps I will illustrate that with an example that might be a little on the simple side.

Imagine you are buying a kitchen and you have the plans drawn up. You like them; you have got the installer and you like him. You look through the terms and you find highlighted somewhere, so it is drawn to your attention, a term to the effect that, if you do not pay in full on the due date, the installer has the right to come into your house and take the kitchen out, without making good and with no consequent liability. Effectively, in that case, you cannot hold any money back, because it has not been finished or something like that, because, if you do, he has the right to come in and rip the kitchen out, and leave you with the result. I hope we would agree that would be an especially onerous term. It is not all that unusual, or it was not when I was looking at a lot of home improvement contracts.

The question is: how does this clause protect you, as a consumer, in relation to that term? It protects you in two different ways. The legislation protects you individually in this kind of situation by making an unfair term unenforceable. The question is: is this term enforceable against you or is something added to that? As a consumer, as a member of the public generally, the breach of the unfair terms law can enable an enforcer like the OFT to step in and ban the future use of a term. That does not protect you directly as an individual. Starting with you as an individual, it is completely unclear what this is supposed to do for you. We think it is likely to be understood as providing that, if the term has been drawn to your attention, particularly as required, then it is fair. I would ask the Committee to consider, as a matter of judgment, whether you are protected by knowing about this term in advance.

We think there are quite a lot of-certainly some-contract terms where prominence is the issue. You think of what are basically fairly reasonable charges, but you might have missed them and they might come as a nasty surprise. If they are drawn to your attention, the problem goes away, but we do not think that a term like this is one of those terms. We do not think transparency is the solution. We do not think transparency is generally a solution to unfair terms. Lack of transparency is part of the problem with many terms, but it is not the whole problem with all terms, and especially not with especially onerous terms of this kind. We think it would be much better if the consumer did not have to worry, and did not have to make a difficult decision as to whether to go ahead with the contract. They might think to chance it: "Maybe this person is alright. Maybe they are not going to enforce this clause against me anyway." Or maybe they are, in which case you lose the kitchen and have to start again, whereas you could otherwise have gone ahead and would not have to worry, because you would know the term was not enforceable against you.

That is one possibility. The other possibility is that it does not have that effect. It does not say what effect it has. Let us assume that it does not make the term enforceable; well then, what does it do for you? It means the trader has to highlight to you a term that is very likely to be unfair and unenforceable against you, which has no meaning. What is the point then of having it highlighted to you? It does not help the trader. It may severely mislead you, because you may think, "The trader is highlighting this to me. It must mean that he knows he can rely on it." Effectively, you would both be misled and deprived of the protection that the legislation ought to be giving you.

That is you as an individual. Then there is the question of whether this clause might help consumers generally. It is clear that, if there is a breach of this term, it could trigger enforcement action to prevent future use of the term. Then we come to a point that is relevant more generally but particularly here, which is that it is not really well known enough that unfair contract laws already make provision to cover the issue of the prominence of unfair terms or terms that can operate to the disadvantage of the consumer.

There was a decision of the House of Lords in 2001 on the interpretation of the unfairness test and a particular part of it, which is known as the good faith requirement. Lord Bingham, giving a leading judgment in that case, said that part of the requirement of good faith is that a term that can operate disadvantageously to the consumer should be given appropriate prominence. We think that is a very valuable piece of law, because it is flexible; it does not rule out the application of all the other criteria of fairness, but it does say that, if a term can be made more fair by prominence, it should be. That would obviously apply if a term is especially onerous as well, so it covers the point. We do not think this clause would add anything of value to this requirement.

That is unfortunately not the end of the story, because, if an enforcer brought action and it came to court, the court would be obliged to try to give some meaning. It could not simply dismiss this provision as redundant; it would have to look at it to say what effect could be given, because these are the words of Parliament. A meaning would have to be found and, unfortunately, where it would be found, as far as we can see, is in the fact that this is restricted to especially onerous terms. We think the end result would be the court would conclude that it is only especially onerous terms that would have to be drawn to the attention of the consumer. For the less onerous ones, which happen to include all the ones where we would say prominence was a solution to the problem, there would not be any requirement to draw them to the consumer’s attention.

Q95 Paul Blomfield: You said in your answer a couple of times that this takes us no further forward. As you fleshed out in that explanation, it sounded to me as if it would take us backwards.

Paul Gurowich: Yes, I am afraid I think it would take us backwards.

Q96 Paul Blomfield: What would you want to see instead?

Paul Gurowich: I think it is unnecessary, so it could simply come out. The other way forward would be a provision crafted to reflect the words of Lord Bingham, about a term that could operate to the disadvantage of the consumer having to be given appropriate prominence. That would not add anything, but it would clarify. I presume this has been included because that point is not clear enough. If it were in the legislation, yes, it would be clear, but it would be a job of work for the parliamentary draftsman to make sure that it did not interfere with the existing legislation.

Q97 Paul Blomfield: Thanks very much. Can I ask about another term, about which we heard in our evidence session last week: the definition of the "average consumer" in clause 67 (5)? We heard that it is a higher standard than the traditional man on the Clapham omnibus. The OFT’s evidence queries whether vulnerable consumers are at a higher risk because of this standard. I wondered if you could amplify that. In particular, does the Unfair Commercial Practices Directive deal with that issue and, if so, how?

Paul Gurowich: We think it does. I would first like to say that there is a prominence requirement in this clause as well. We do not think that our objections to clause 71 apply to that, because that is in a different context. This is about whether the fairness test applies, so it cannot come back on what the fairness test provides. We are quite happy to see this prominence requirement here, and our only concern is with the details of it, such as this reference to the average consumer.

The point we have here is that the idea of the average consumer is not one that has hitherto figured in the unfair terms legislation as it is. It is being introduced here for the first time and in a rather short and simple way. As you say and as has been indicated, we would rather see the slightly more sophisticated version used in Unfair Commercial Practices legislation being used.

We agree with Which?; yes, the standard is a high one. The point that we would add here is not so much about whether it is high or low but the fact that it is inflexible. Generally, what you have got with the unfair terms legislation is a very flexible approach. The fairness test is designed to be applied in all the circumstances of the case, which means that you cannot be absolutely sure about whether a term is fair or not, but that is probably inevitable. That flexible approach is fair, both to the consumer and to the trader, but the average consumer concept is rigid. It will be obvious, I think to all of you, that some consumers are better able to read and understand contracts than others, just as some consumers are more likely to be vulnerable to scams or highpressure selling than others. We think the legislation should reflect that. We are not saying that the standard that is applied should be that of a lazy or inattentive consumer, but it should be the standard of the average consumer at whom that kind of contract is targeted-who could be reasonably expected to be using that contract or contracting under those terms.

For instance-again, a very simple example-if it is a product that is targeted at elderly people, the contract should not use the smallest possible print. Some of us, my age included, find a little difficultly with that. There are more sophisticated examples you could come across than that, but the basic idea is that, otherwise, you have some scope for exploitation. We do not think this is asking for the moon, because the Unfair Commercial Practices legislation is obviously comparable here. In addition, it has to be operated along with the unfair terms regulations; they deal with two sides of the same coin. You have the marketing that leads up to the contract and then you have the contract terms. It would be odd to have a standard that was less flexible in one than the other. The Unfair Commercial Practices standard reads in a complicated way, but what it does is say that the standard shall be that of the group at whom the practice is targeted, the average consumer, and that is what we think would be better here, if there is going to be a reference to the average consumer, which is not essential anyway.

Chair: Can I bring in Ann McKechin on enforcement?

Q98 Ann McKechin: If we could turn to the issue about enforcement powers, as it stands, the draft Bill does not include a requirement for trading standards officers to be competent in relation to all consumer law matters. What are the implications for consumers and businesses of the Government’s decision to omit this standard, given, as we are all aware, there have been very considerable cuts in local authority spending, which has hit directly trading standards departments?

Andy Foster: I would be happy to try to explain that, if I can. As the Committee will be well aware, in terms of the Business Department legislation, we only have one requirement to be competent laid down in statute, and that is the Weights and Measures law, or legal metrology as it is known. That leaves quite a lot of scope for different approaches to how officers are to be considered competent across the whole range of what officers are enforcing.

We were quite disappointed. Although we were consulted on the prospect of having a more generic requirement to be competent, which we were very supportive of, when the draft Bill was published, it did not contain any such proposals. The danger is that local authorities will take variable approaches as to how they will interpret competence. In some cases, because of budget pressures-not necessarily through choice but through being forced into that-they will probably seek the lowest common denominator of whatever they can get away with. In some cases, we will see officers who are brought in instantly with an authorisation to carry out a full range of enforcement duties, save the statutory requirements. In some cases, they will respect the national qualification framework that exists. What we were hoping for was a generic requirement to be competent across the board. That would be underpinned by a code of practice.

Q99 Ann McKechin: Can I stop you there, just for the benefit of the panel? You talked about the national qualification levels. At the current time, is there a set level at which all local authorities have to employ staff who deal with trading standards?

Andy Foster: The answer is no. The reason for that is that there is no statutory requirement that recognises the qualification framework. However, there is only one qualification framework; it just does not have statutory basis. That is the difference. We see that most authorities will follow and respect the qualification framework; however, some choose not do. They have different interpretations as to how they ensure their officers are competent.

Q100 Ann McKechin: They could, for example, employ someone who is at a clerical level in the council to undertake some of the work that would be here in terms of consumer enforcement.

Andy Foster: That is technically correct. In some cases, we do see officers brought in at perhaps a more junior level and trained to carry out a specific task-a very narrow focus of what they do. As long as they are trained to do that, there is perhaps no issue with that. The issue is when they are asked to carry out a wider range of enforcement duties. The reason why we are concerned by that approach is that it carries risk. It carries risk for the local authority.

For example, if an officer is advising a business on how to label a particular product or how to go about ensuring an effective product recall, in terms of unsafe products that are put out there, and that goes wrong or they make a mistake in giving that advice, we are into a situation where that company may have to recall that product or amend that product. That, of course, carries considerable cost to them. The whole point about competency is that it is almost a way of mitigating a risk, in that they are less likely to make mistakes. That carries benefits for the business, which of course only wants to have competent assured advice at the first attempt, and mitigates the risk for the local authority, which is less likely then to have to deal with litigation or to clear up any mess that occurs because of perhaps a mistake by an officer.

Q101 Ann McKechin: How small can trading standards departments be in local authorities? Obviously, they vary very much across the country, in terms of size, but it would be quite helpful for the panel to have an understanding of how small a trading standards department could actually be in a local authority.

Andy Foster: We understand that there are some authorities out there that have half an officer, if that is even possible, so half an FTE. That is quite rare, and more the exception rather than the rule. There are other departments, particularly county councils or the larger unitaries, like some of the city councils, which have 60 or 80 officers or something like that.

In the past, we have tried to answer the question of what the perfect size of a trading standards service is, and we have come to the conclusion that there is no onesizefitsall approach. It is all about what risk the business community poses to that particular council. What is the nature of the businesses that are involved? Therefore, you can then start to work out what the demand might be. There might be particular issues with alcohol disorder or around a particular aspect. Of course, that then starts to dictate the size of your particular trading standards service. There is no easy answer to that, but it is about being able to respond to the risks presented by the community.

Q102 Chair: Ann, just before you go on to your next question, I have a supplementary and I know Brian has. Can we just intervene for a second? From one perspective, not having specialist, trained, socalled competent officers, could you envisage a situation where an investigation was carried out and a business basically accused of producing or selling faulty goods, and that business challenging it legally on the basis of the competence of the officer who has made that intervention?

Andy Foster: There are two aspects to that. Quite often, when we are defending or prosecuting cases in court, there are a couple of lines of enquiry. One is around the evidence case, which is usually always satisfied. Quite often, we find defence lawyers going down the route of: is this person properly authorised? They will follow a chain of delegated authority. The third option is around making sure the officer is competent. In the absence of any statutory requirement, they will look to perhaps best practice or any kind of nonstatutory guidance to ascertain the answer. However, I am not aware of any cases that have been lost because they were unable to make out the nonstatutory guidance requirements on that case. That is the point we are making: it poses a risk to our profession and local authorities and, therefore, we are delivering risk to businesses, unless we have a uniform approach to how we deliver and define competence.

We are engaging with the Bill team about a nonstatutory code of practice, but our concern is about the level of takeup that might have across local authorities. Putting it bluntly, if they do not have to do it, why would they spend money on it? When we are dealing with these very difficult budget deficits, they are the sorts of questions that are being asked.

Q103 Chair: You said that you do not know of a case that has been lost, but could it in effect generate cases, even though the probability of their actually being lost is fairly slight?

Andy Foster: That is a possibility. Do you want to add to that, Ivan?

Ivan Hancock: I get involved in the prosecution and defence side of cases quite regularly.

Chair: Could you speak up slightly? You might move across slightly.

Ivan Hancock: It is fair to say, from the experience of dealing with court work and legal challenges, that a regular stance taken by a defence is to look at the competence of the officer who has given evidence. If there were some statutory basis on which we could rely, that would give us more certainty and surety.

The other thing I would emphasise, from the point of view of the local authorities employing officers and working in this field, is that the cuts are severe. We are faced with making our own arguments, within our local authorities, to ensure that our officers are properly trained, as we would wish them to be. Where something is not laid down in statute, we are up against it in trying to show to our local authorities that money should be spent in that way, particularly if there is another priority that has that statutory backing.

Q104 Mr Binley: I am confused. I was a county councillor and the financial resources portfolio holder, and I was always under pressure from Trading Standards to ensure that their budget was higher than it normally is, because of the pressures you are under. I understood that, but you tend not to be the favourite son of budget makers in local government, quite frankly. I am concerned and I need your help to unravel this. I have a note that says that the "CMA is likely to take fewer consumer enforcement cases than the OFT traditionally did because of the new national enforcement role taken on by [TSS]".

Chair: I think you are pinching somebody else’s question.

Mr Binley: It is my question on 12 as well. I have not got to my question yet. I do not understand how Trading Standards, which is a very splitup operation, very underresourced in most areas, can take on a national company that the CMA says it is not going to take on because it does not have the resources to do it. Can you unravel that for me?

Andy Foster: If I can perhaps start, this is a question that starts to probe at the institutional changes that have happened over the last couple of years. In answer to your question, it is an absolutely fair challenge in terms of the capacity of the whole system. Is it resourced enough to deal with the sorts of consumer cases that are being dealt with and that we are uncovering? That could be anything from a fairly lowlevel fraudster or counterfeiter, right through to a bank charges case or, indeed, perhaps some unfair terms issues, from an airline for example. You are indeed right: that is a huge financial challenge for the system.

However, we are given some reassurance from some of the changes that have happened. Local authorities are indeed responsible for providing a trading standards service, and there are approximately 197 of them up and down the UK. Having said that, there are some two groups that have been set up specifically to deal with national issues. One is Trading Standards covering Scotland, so that is the national team dealing with national issues. For England and Wales, it is the National Trading Standards Board, which has a particular national remit and indeed have taken on some of the OFT’s current national cases. With that comes extra resource, which has come across from the Business Department, to pay for some of those issues. I guess that time will tell as to whether that budget is enough.

Mr Binley: That helps me, thank you.

Chair: You pre-empted your own question.

Mr Binley: I know I did, but it seemed to be a part of this discussion.

Chair: I agree. Back to you, Ann.

Q105 Ann McKechin: Could I turn to the question of privilege? The OFT considers that the safeguards in the Bill would extend the privilege against selfincrimination to not only criminal proceedings but civil remedies. They suggested that this could create a risk that enforcers would be unable to obtain evidence in civil investigations through written requests for information, which would lead to more onsite visits, with cost implications accordingly. I am just wondering what your own professional assessment is of that risk if the law should change in that way.

Ivan Hancock: If I could answer that, wherever we have the ability, under the current Enterprise Act, to make enquiries and to get information in relation to possible civil proceedings, it is extremely helpful. There is still prevention from somebody incriminating himself for criminal proceedings. One has to be very careful about which route one is going down. Of course, it would be helpful to restrict the selfincrimination provisions, such that you could get as much information under civil law as you could under criminal. We recognise that would perhaps go against the grain slightly, and we do understand those restrictions. In answer to your question, yes, if there is a privilege element to getting information for civil purposes, it will restrict what we can get. We are used to doing that under the Enterprise Act, where we use that.

Q106 Ann McKechin: In terms of the number of cases you might deal with in any one year, roughly what percentage would go to a criminal court procedure and what percentage would just be dealt with under civil law?

Ivan Hancock: That is an interesting question because, when the Enterprise Act came in, it gave us the ability to use civil sanctions, should we require them. What we have found, up and down the country, is that there are some difficulties and there are some novelties around using the civil courts. Also, officers do not have the right of audience that they do in the criminal courts to present their own cases, so there is a natural adherence to the enforcement process using prosecution. As a proportion, I would have said that over 90% of the formal actions would be of a criminal nature.

What is important to point out is that, where there is a civil route that is being chosen, it can be used as a way of dissuading a business from doing something. Certainly, in my own authority, we do a fair amount of prosecution work and we hardly do any formal civil action, but we use the threat of civil action and the negotiation process that leads up to that quite regularly to dissuade businesses from doing certain things and to give us informal assurances that they will change their practices. In a sense, it is understandable that the formal route through a court, in terms of civil action, does not happen that often.

Q107 Ann McKechin: If a business understood that they have a right of privilege about selfincrimination, in all proceedings when dealing with trading standards, you believe that would restrict the flexibility that you might have in how you would approach a case.

Ivan Hancock: It would. The civil route is not that favoured anyway, but where it is favoured, we can get more information and it is a more negotiable type of settlement that is sought, as opposed to prosecution, where nobody says anything unless they have to and we will prove our case in court, if we need to. Even in those cases, I would not want to give the impression that our solutions for consumer problems are about formal action. The approach of trading standards, up and down the country-and it is easy to forget that when you are looking at a Bill like this-is about negotiation to change businesses’ practices and sort out consumers’ problems.

Q108 Nadhim Zahawi: You argue that the requirement to serve notice prior to using a power of entry will undermine the effectiveness of trading standards’ ability to detect consumer law breaches. The draft Bill provides for certain exemptions, including where the enforcer reasonably considers that to give notice would defeat the purpose of the entry. Why do you think these exemptions are inadequate?

Andy Foster: I would be happy to make a start on that, if I can. There are a few reasons why we feel that it may weaken the consumer protection system, in some cases, and we accept that it is not for all cases. First of all, the purpose of the Bill was to bring powers together in a generic sense. The first observation is that of course this only relates to Business Department policy areas. Trading standards officers have a very wide portfolio, including licensing controls and food safety provisions, so we have a situation where officers are still deriving powers from a number of different sources, so it has possibly not fulfilled that objective.

The main point is around the principle of bringing to an end the power to make unannounced inspection where no suspicion exists. I do use those words carefully. Perhaps we could explain, through some case studies later, about where that might become apparent. We have looked at the exemptions and we do not think that, in some circumstances, they do go far enough or give us enough flexibility to make officer judgment in order to investigate certain cases. The main principle behind all this is that we think we are going from a place of certainty, in terms of what our powers are, to a place of uncertainty.

We have commissioned the advice of some colleagues and some barristers, in terms of understanding what the requirement to make out the reasonable cause to suspect provisions is. Indeed, we are left with a range of conclusions. While we understand that the evidence base for making that out might be reasonably low, according to certain case studies, nevertheless, there is an element of doubt that is introduced into all the examples. Even when discussing with colleagues and members of the Bill team, we are left with a conclusion that we may be able to make out this provision in certain circumstances and we may not in other cases. Ivan will speak as a prosecutor, but, when resources are so low, we are very unlikely to take risks or big leaps of faith. The result of all that is likely to be less action. They are the outline principles.

We may want to choose the opportunity to go into some of the exemptions in a little more detail. Indeed, we are heartened by some of the exemptions that narrow down even further the types of cases that we would be unable to use them in. In particular, of course, we respect that some businesses do say to us that they welcome unannounced checks, because it helps them with their compliance regime; it helps them keep on their toes, for want of a better term. They may want to waive that notice.

Secondly, there is an exemption in here, under (c), that talks about two things, and it is worth spending some time on. Regarding where the officer "reasonably considers that to give notice in accordance with this paragraph would defeat the purpose of the entry, in particular because the officer has reasonable cause to suspect that evidence may be lost or destroyed", that is the one exemption that we would be most likely to use, particularly with some of the case studies that I have submitted in the written evidence.

The problem with that particular paragraph (c) is that it brings a double test to the scenario. We have to provide two things: first of all, the officer has to make the judgment as to whether this is likely to defeat the purpose of the object; and secondly, he has to make out reasonable cause that evidence may be lost or destroyed. We are reassured by the two words "in particular", which we read as being "an example of", but, nevertheless, that seems to take us to a higher level of proof or burden than perhaps some other legislation that has been passed in the last year, like the Construction Product Regulations or the Cosmetic Product Regulations, which just end that sentence with "defeat the purpose of the inspection". I think the exemptions do not quite go far enough but, perhaps with some amendments, they would take us to a more satisfactory position.

The final point I would make is around cost. We have started to talk already about the huge challenge that local authorities have in financing their trading standards service. The Impact Assessment here talks about, at the higher level, £2.5 million over the period laid down in the Impact Assessment. We are talking about a service that only costs the entire UK about £150 million a year, so this is quite a substantial cost to local authorities. In my view, the Impact Assessment is a very conservative estimate as to what those costs may be, and we think the question here is: for what value? When we are talking about £2.5 million in a system that perhaps some would argue makes our job more difficult, we are starting to struggle as to working out where we might get return on that investment.

Ivan Hancock: The key words there about uncertainty. For a local authority with diminished budgets and increased resistance to spend money on legal cases, the idea of going from a position of certainty to one where there is doubt and debate is only going to take up more officer time and money. One has to wonder why such a measure should be there, when the purpose of trading standards is to look at trading practices and ensure everything is sound, in terms of what the consumer wishes and what the law requires.

To have to give two working days’ notice to do that role just seems a bit odd, bearing in mind we have already accepted that, if we are talking about domestic premises or something that is partially or wholly used as a dwelling, we would not seek to use our powers. We recognise that that is a special place. We take into account the Protection of Freedoms Act and the whole policy behind it. Even taking account of that, it seems odd that one would have to give two days’ notice to essentially do one’s job. I do wonder what consumers would make of that. We may well be able to wriggle around the various exemptions, if they are improved slightly, to find a way through this, but there would still be time wasted in considering the particular aspects of this section.

I work in a rural county. An officer might drive 25 to 30 miles to carry out a visit and then see something they are not sure about. They have not got any real suspicion, but they have to serve a notice and come back two days later, having discussed the ins and outs of it with another officer. I just question whether this is really proportionate. This is against the background of a service that is evolving and changing, as a result of the Hampton review, taking account of the Regulators’ Compliance Code and looking towards the new Regulators’ Code, where we are recognising that we need to support businesses wherever we can and reduce the burden wherever we can. The enforcement angle is the tip of the iceberg, and it is not helping mainstream business. It is there as assistance to rogue business.

Q109 Chair: Just before we go on, I understand the point you are making and I have considerable sympathy for it, but could an argument be constructed that, in effect, trading standards now spends a lot of time carrying out routine inspections, which do not result in any actions, shall we say?

Ivan Hancock: That is not the case. We work under an umbrella of "no inspection without a reason". There are very few authorities around the country that are able to, or have the ambition to, carry out routine inspections as they wish. We focus on high risk. What this section would do is take away that opportunity for a lively enforcement officer, with an eye for things that can go wrong, to visit an industrial estate in a faraway place and have an eye for some possibly illegal tobacco going in and out or some electrical goods at a unit they have never seen before, and undertake an inspection on the spot, without any suspicion. I certainly would not want to give the impression that trading standards are what they might have been 10 or 20 years ago: pacing the streets with records, carrying out surprise visits on everyone.

Q110 Chair: In effect, would it be fair to say that this section of the draft legislation is designed to meet a problem that does not exist now?

Ivan Hancock: I would suggest that, yes.

Andy Foster: I wonder if I might supplement that point by hammering in on that last point. Of course, we have come from the last eight years, during which we have had successive very laudable initiatives coming from the Business Department-things like the Sir Philip Hampton review and the Regulators’ Compliance Code, which has been refreshed recently. Every single local authority up and down the country will have its own enforcement policy, largely saying the same thing.

The main point here is that there seems to be an unhealthy suggestion across some commentators that, just because officers have powers, they use them irresponsibly or disproportionately. I would say that, whilst we would be the first to admit that anything that helps officers become more accountable for their actions is a good thing, we do need that element of flexibility. In some cases, we need to use certain powers in order to spot breaches of the legislation. That is a fundamental requirement. That is why we have suggested that the Regulators’ Code be looked at perhaps as a better vehicle to deal with the culture, if that indeed is the purpose of the exercise. I would suggest that a Consumer Rights Bill perhaps is not the right place for this to happen: a sledgehammer to crack a nut.

Q111 Nadhim Zahawi: You have made that suggestion. You have also suggested that a more appropriate route would be for local authorities to be required to publish their policies on inspection without warrant and details of how that can be challenged using local democratic channels. How would this work, given that the draft Bill proposes to allow trading standards to work across local authority boundaries?

Ivan Hancock: The point here is that, whilst the Bill gives us the ability to work across boundaries, again you are mindful of codes and good practice within trading standards anyway. There would be absolutely no expectation that trading standards officers from, say, Dorset would be off working in Hampshire visiting, without having consulted with Hampshire and paid regard to their local practices. There are already things at national level in place around the Primary Authority scheme, which is very regimented, and so there is already a regime of understanding that, whilst one might have powers to enforce certain things in certain areas under certain legislation already, we do not drop around the country doing work in other people’s areas without taking account of local conditions. I would see that as something that would be a reasonable expectation of a trading standards authority: not to execute their powers in another area without having spoken to that local authority in which they are intending to tread.

Q112 Nadhim Zahawi: The draft Bill reduces the offense of obstructing an enforcer from a £5,000 fine to £1,000. What is the rationale behind that change?

Chair: Apologies, we are just reorganising the question sequence.

Andy Foster: Are you asking us what the rationale is?

Chair: We are just having fun amongst ourselves.

Andy Foster: I am not sure I know the rationale behind that.

Chair: My apologies. Nadhim, have you finished?

Nadhim Zahawi: I have, yes.

Chair: It is actually Robin’s question.

Q113 Mr Walker: Nadhim asked it beautifully, so that is fine. I think you have been quite critical about that in your written evidence-the suggestion of reducing this fine and the risks of that. I will not necessarily ask you to justify it, but what do you think the risks are and are there any other examples of fines like this coming down? Certainly, I have served on a number of statutory instruments where we have been increasing fines for misbehaviour by businesses, because the smaller fines have not worked. Can you see any reason why this fine should be being reduced rather than increased?

Andy Foster: No, but that is my own opinion. It probably brings us into a lesser place than it is in other legislation, where there are similar obstruction offences. Some might suggest it brings us in line with certain obstructions for police officer offences. Here we are in a situation where not only are we having to change the requirements about spot checks, but also the incentive to cooperate with an enforcement official. For someone who is unscrupulous, of course, and that would not apply to the majority of businesses out there, it seems to have been taken away, so we are suggesting that there is a possibility that this could increase the likelihood of businesses taking a commercial decision and saying, "Actually, we are not going to cooperate on this occasion, and we’d rather take the £1,000 fine than you uncover the evidence." That is very much a hypothetical example, I appreciate, but nevertheless that is where our concerns are based.

Ivan Hancock: In 30 years of dealing with cases and prosecutions at the sharp end-very much the tip of the iceberg-I have never come across a reputable company, when they have been given the right information, commit an obstruction offence. The only time that we have used an obstruction offence is against rogue traders and unscrupulous traders. I find it amazing that, whilst in legislation such as the Consumer Protection Regulations, the Consumer Protection Act dealing with product safety, food safety and Weights and Measures law the offence for obstruction is pretty much the same in nearly all cases as the prime offence, in this it seeks to demote it to a lesser level. I really do not understand it, especially when you consider that, to commit an obstruction offence, you have to do it knowingly or recklessly. A business cannot inadvertently obstruct an officer. This is an offence for rogue traders, and so why on earth would the obstruction offence attract a lesser fine?

Q114 Mr Walker: You mentioned that you feel that these are fines that only tend to get levied on rogue traders. They do not tend to get levied that often. With what sort of regularity is the £5,000 fine being generated, at the moment?

Ivan Hancock: As with all maximum penalties, it is a maximum penalty. You are taking into account early guilty pleas and various circumstances. With a maximum penalty of £5,000, you would be unlikely to see a penalty levied of £2,000 at the very most, particularly if you have not managed to uncover the main offence. I must say that, from a professional point of view, the idea of being left with a case that involves obstruction and very little else is not really the answer. The answer is to get your evidence and take the case, but some people obstruct us on the way and they will be included. Obstruction is a problem; there needs to be a decent deterrent to it.

One other angle to this is, if any case is taken against a trader, we are often talking about multiple offences, all with this maximum penalty. The offence of obstruction is, more often than not, an individual offence of: "You’re not coming in. Go away; you’re not having what you want." It is often one offence, as against 10. The main purpose of taking the action may have a potential maximum fine or penalty of a lot more, so I do not think it stacks up.

Paul Gurowich: I do not think we would have an awful lot to add to that. Our concerns lie around the privilege against incrimination issue, because we are a national authority and we tend to proceed on the basis of seeking written evidence, rather than going around on site inspections.

Q115 Mr Binley: Mr Hancock, your experience suggests it is a maximum level, as exists at the moment, and it normally comes down to less than 50% of that maximum. If that happened under the new recommendations, it would be almost minimis, wouldn’t it?

Ivan Hancock: It would. I am sure if you consulted rogue traders on this legislation, they would want it reduced even further.

Q116 Mr Binley: They would absolutely love it, would they not? What we are really saying is, just like some very wealthy people often pay parking fines because it suits them and they can afford to, it is the same with rogue traders, if we were in this situation.

Ivan Hancock: I would agree with you. One can draw parallels with failure to give a breath test and things like that. I am not saying all of our offences are that serious, but the principle is there.

Mr Binley: Absolutely right. I just want to underline the strength of what you were saying, because it seems to me to be a very important point indeed.

Chair: Unfortunately, I do not think we had any written evidence submitted by rogue traders. Have you finished, Robin?

Mr Walker: Yes, thank you.

Chair: Just before we go on to Mike’s questions, can I just explain that one or two Members have to go. The notes you saw being passed around were not a commentary on your answers but my attempts to reorganise the questions to accommodate that.

Q117 Mike Crockart: The Government has estimated that the budget for trading standards is likely to fall by around 20% to 30% by 2015. Looking at the Impact Assessment that was done on these figures, they seem to rely on the fact that inspections will be more on an intelligenceled approach, thereby reducing the number of routine inspections, which gives a range of £190,000 to £284,000. Is that a reasonable estimate to rely on, given what you have already said about the change in culture away from routine inspections?

Ivan Hancock: It is certainly fair to say that the intelligenceled approach is blossoming more and more. It is something that started after the Hampton review and has carried on. Where you are guided by intelligence, you may well not have what the law talks about as being reasonable suspicion. Other information takes you to certain places, as opposed to suspicion about certain premise. We can only anticipate the number of routine visits continuing to go down and down. If we are talking about the highrisk sector, I would anticipate that visits to highrisk premises that are riskweighted in that way would continue but, generally, routine visits would go down and down. I could not challenge the figures on it; I would support those.

Andy Foster: I might supplement that point. I think it is worth spending a moment thinking about the difference between riskbased approaches and intelligenceled approaches. The two are part of the same approach but, in one case where we have complaints about a particular business, we are able to take advantage of quite a lot of the safeguards that are in our power set. In cases where we just simply assess the business and come to the conclusion it poses a high risk, for whatever reason, generally we would use the same risk assessment criteria that have been developed over the years by the Local Government Association.

That does not then mean that we can make out the reasonable suspicion element. It just means there is a higher risk of something going wrong or, if it does go wrong, it presents a higher risk to the community at large. There is a difference between the two. We all agree that we operate on a riskbased proportionate targeted approach; that does not necessarily mean we have intelligence that allows us to use the full range of powers that we have here. There is still going to be a requirement to carry out routine inspections, and I do not think that there is a suggestion here that is going to outlaw routine inspections, save the fact that we perhaps might not be able to use our powers on some occasions.

We can draw some similarities from the dreaded horsemeat scandal, which is still on people’s lips. People outside the profession, and perhaps outside the business world, are calling for us to carry out more unannounced inspections-more testing and more samples. Actually, that almost comes at odds with the regime that we have in front of us here, which is suggesting that we wait until we have complaints or some kind of intelligence before we do something. I do not think it is quite as clearcut as that. We will still see a range of routine interventions that are riskbased and targeted but not necessarily based on particular complaints.

Q118 Mike Crockart: I am confused now, because we heard in evidence earlier on that you seemed to be suggesting that you had already moved away from routine towards riskbased or intelligenceled inspections. Therefore, there were not savings to be made there but, in your answer there, you say it is a blossoming area.

Ivan Hancock: No. The intelligenceled approach is a blossoming area.

Mike Crockart: That suggests that there are more savings that can be made in that area.

Ivan Hancock: Where you have an intelligenceled approach, it enables you to have a list of priorities. You may not be able to meet all of those priorities, so it leaves you to decide where you should pay most attention, but you might not get to the bottom of the list.

Andy Foster: To supplement that a little bit further, carrying out a routine inspection could still be a valid intervention for dealing with an intelligenceled approach. It is one of the tools in the box to assess compliance, so the two things are not necessarily mutually exclusive in that respect.

Q119 Mike Crockart: As there will be fewer inspections happening given lower resources, should the proposed enhanced consumer remedies, i.e. those measures aimed at securing redress for consumers, be extended to private enforcers as well?

Andy Foster: Generally, we are of the opinion that more capacity in the system at large, in the round, is a good thing. Whilst in a perfect world trading standards would be well resourced enough, plus other public enforcers, to carry out the full range of demands that are upon us, we have to live in the real world and accept that there are some merits for private enforcers to carry out some of that work. We would not object to that, so long as the same safeguards, checks and balances that apply to public enforcers apply to them .

Q120 Mike Crockart: Are there particular areas in which you think that would work best?

Andy Foster: There are some areas where certain organisations have a particular evidence base that they would want to develop. There are certain areas, for example in terms of enforcing copyrights and intellectual property rights, where the brand holder or representatives of them are well placed to assert those rights, but those are the kinds of areas that we would observe.

Gordon Ashworth: Can I add that we support that as well? We think that is a positive move in terms of suitability. You can take the example of Which?, which is already an approved Part 8 enforcer under the Enterprise Act. The issue is not really fitness or suitability to do it; it is whether in practice it actually happens. If you look at Which?’s role as a Part 8 enforcer, they have not actually taken any cases. There need to be reasons that has not happened.

One could be that, simply, they are more interested in redress than taking out injunctive action, which would be logical, but also, we could say from our experience as an enforcer, if you look at the wide range of legislation that we enforce under Part 8 of the Enterprise Act, it is very difficult to retain the expertise and specialism to do this if you are only doing it occasionally. Regular enforcement of cases of all sizes helps you build your capability and your expertise. Expanding the base of bodies that can do it is a very good idea. You have to look at whether they are going to be doing that on a regular basis. If they are not doing it on a regular basis, how viable does it then become for them to step in occasionally? That is quite a hard thing to do, but it is certainly worth looking at. We have no objection to that as a forward step.

Q121 Mike Crockart: Particularly in the enhanced consumer remedies, the point you are making there is that private enforcers have not entered into this up until now, but the situation up until now has been very much that it is criminal rather than the civil remedies, surely.

Gordon Ashworth: It is the redress point that is likely to interest them. If they can be part of a solution to a problem that is seen as a consumer disadvantage, that is very attractive. They are interested; it makes sense to have them in. It is how we could help others do it on a regular basis, because it is a resource saver for others, and there is limited resource in the system, but it is then about how they are going to be able to do it on a regular basis. That would need some attention.

Q122 Mike Crockart: If we could move on then to a separate point about another measure in the Bill, courts and enforcers will only be able to use the enhanced consumer measures when to do so would be "just, reasonable and proportionate"; that is Schedule 6. All enforcers are already bound by the Regulators’ Code, so does this extra requirement place unnecessary restrictions on public enforcers?

Paul Gurowich: We would say yes. I am sure trading standards colleagues may have a view on this as well. I would echo much of what has already been said about the fact that there is a good deal of legislation and requirement around the issues of better regulation. You have heard mention of the Regulators’ Compliance Code, and that all operates at the level of principles. It is qualitative in nature, and the OFT is bound by this, just like trading standards. In fact, it has its own specific requirements under other legislation. We set out our stall on this in our own statement of enforcement principles. The problem is not with the objective; it is with the way of doing it.

We have here legislation that makes very specific reference to costs and benefits, and the need to assess them, rather than underlining a general principle of the need to avoid imposing unnecessary burdens. There is a particular provision here around situations where consumers have suffered loss, in which the requirement is that consumer measures must not cost more than the loss that has been experienced. It is very hard to see how that requirement can be met without undertaking a full statistical analysis-an econometric analysis-and that is going to be expensive. Some of the big cases that the OFT, or CMA in future, may take might be cases where that is highly appropriate. Nobody is denying that cost–benefit analysis has its uses, and even detailed cost–benefit analysis, in cases where millions of pounds are at stake.

Chair: I think we are straying on the territory of the next question. Mike, do you have you any further points you want to make?

Q123 Mike Crockart: I am just looking for trading standards’ view of this extra requirement to be "just, reasonable and proportionate", because it does not sound like a terribly dreadful thing to be asked to be.

Ivan Hancock: No. As the Office of Fair Trading put forward, the current Regulators’ Compliance Code, and certainly the new Regulators’ Code, makes great play of what we should have the ambition to do to ensure our enforcement policy is proportionate and balanced, and nothing is done without good reason. We do not have a problem with that. I am slightly concerned about the idea that we might be talking about detailed cost–benefit analysis. If that is what the legislation is expecting, we would be concerned. I am not sure if that is really what is being asked for. It seems as though these sorts of things could be brought out in one place, in a regulators’ code that makes us consider these points, as opposed to having some general phrases in the legislation that could cause very particular problems on a particular case or changing the behaviour of a regulator, in terms of its general enforcement policy.

Q124 Katy Clark: Details of the possible enhanced consumer measures are not included in the Bill. There has been some criticism of this, and business in particular is saying that they would like more detail. In your opinion, would you support the issuing of accompanying guidance on appropriate measures?

Paul Gurowich: Yes. In very simple terms, we do think that these enhanced consumer measures need more detail or fleshing out. I jumped in here; I daresay trading standards will have their say on this as well. Some of that guidance will come from enforcers in due course. We would expect always to explain the way we approach the use of our powers, but there is a higher need, an initial need, for more guidance to flesh out what these panels are actually about-the cases that they are designed to be suitable for, and also this issue of how to meet the requirement of showing the benefit to consumers and that it does not exceed costs for business as well.

It might be worth widening the focus a little in terms of this guidance and remembering that there are provisions like this in other jurisdictions, some of which are not very different from our own. The Australian experience might be worth considering here. I am not pretending that we have any detailed knowledge of that, but the OFT’s equivalent in Australia, the ACCC, has had powers that are comparable for some years, and obviously the relevant power is the power to seek what are called community service orders.

A good example of the use of one of these powers-it did not actually go to court-was a case settled on the basis of undertakings that involved what would be to some of us the very familiar name of Woolworths, which was found to be selling children’s nightwear that was not properly labelled in safety terms. Woolworths agreed, by way of settlement, to make two large donations to Sydney Children’s Hospital and a relevant research project. That gives a kind of example that could perhaps be drawn on in comparing this guidance.

Andy Foster: Just to echo that, I can understand one of the dangers of having detailed guidance in this area is that it becomes a definitive list and almost would be seen as an exhaustive list of measures that could be taken. I can understand the logic behind the Bill remaining silent on such aspects, and that can be dealt with perhaps through guidance, which will give a flavour of the sorts of measures that can be introduced. The Impact Assessment starts to touch upon some of those areas. It is important that both businesses and enforcers understand the framework that they are working within and the sorts of measures that might be helpful, almost as a toolbox for both businesses and enforcers to work together to remedy situations that have caused extensive consumer detriment. There is an element there around competence, and having a menu of what is possible would be helpful in this area, so I would support the development of guidance on that basis.

Ivan Hancock: I recognise the need for flexibility there, because the idea is to have some innovation here to find solutions for consumers. I would go along with the comments made.

Q125 Katy Clark: The next question is primarily for Andy and Ivan. The OFT has told us of its concern that the complex cost–benefit analysis that enforcers and courts would be required to undertake would mean that, in practice, enforcers would be likely to avoid using the enhanced consumer measures. Do trading standards services have the skills and capacity to undertake that type of analysis?

Andy Foster: I would say that is a skill that perhaps may be lacking in some areas at the moment and would need to be developed. In terms of the familiarisation costs that might be attached to that aspect of it, they would need looking at. Generally, the point we would make here is that the more barriers that are put in the way of using enhanced consumer measures, the more likely it is that we will use the criminal route to deal with a particular issue. That starts to illustrate perhaps some of the cultural issues as to why we have such a 90/10 split between the criminal cases that happened in the past couple of years and civil action. Of course, in some circumstances, the criminal route is not an option. There are no offences that have been made out but, nevertheless, generally, this is potentially good news for consumers, in terms of the redress that is accessed, and so I would support its use.

However, there needs to be a reasonable balance between the avenues that will allow us to get to that point of redress and, indeed, undertakings to stop the future behaviour of that business if it is trading unfairly, and also making it easy for the enforcement authorities to do that. We would be happy with reasonable steps, but we would prefer it if there was more flexibility in the model; business could perhaps come up with solutions, and we could move to a stage where they are ratified by the enforcer or agreed with the enforcer, rather than the onus being on the enforcer in the first place.

Chair: Thank you. I need to come back on this theme with Brian in a moment, but I know Rebecca has to leave shortly, so can I just bring you in with your questions?

Q126 Rebecca Harris: Yes, thank you, Chair. I have a couple of questions about private actions in competition law. We heard some quite serious concerns from CBI and the British Retail Consortium about the optout in collective actions. I just wondered if there was any evidence you could give us to demonstrate that the existing optin regime is not working.

Gordon Ashworth: I will take that one. We do think there is a role for private actions, and it can complement the public enforcement role. Limited resources, in terms of public enforcement, mean that not everyone is going to get redress unless there is some other system that can be used. There is an optin system, and unfortunately there has only been one case taken so far, which is the replica kits case that was taken by the Consumers’ Association, otherwise known as Which? Indeed, that only dealt with 130 consumers, which is a small fraction of the number that would have been disadvantaged in that case.

The first principle is whether there is a role for private actions at all. Obviously, there are differing views on that. We think there is. Then it is what an appropriate system is. We would just argue that the system at the moment is not delivering anything, because if there has only been one case and that case did not attract a wide level of interest, we need to look at how else that might be done. We think optout is a reasonable way to go.

Clearly, it does raise issues that concern people about how that is going to happen in practice: will the claims be meritorious and what sorts of burdens will be placed on businesses for claims that really do not have much merit? We fully support the safeguards that are proposed around the CAT and also some provisions about no triple damages, loser pays and all the other elements that are in there at the moment. We think you have to get a wider body of claimants involved because, if you do not, a system like this is just not going to be costeffective. We do support it but we recognise concerns. We think the safeguards that are proposed would generally do the job.

Q127 Rebecca Harris: Thank you. That was my second question: do you think the safeguards that are in there are adequate, with the increased litigation costs and risk of ambulance chasers?

Gordon Ashworth: On the ambulance chasers point, in terms of who is taking the case and their incentives, that is a key concern to how the system would work. We have said previously in submissions that we think further consideration should be given to the circumstances in which class members themselves should be able to bring a representative action, because problems can arise where interests are confused, for example if law firms are taking the lead in terms of cases. A class member may be less capable or less incentivised to minimise costs in a case like this, so we think that would need some consideration, but generally we think the safeguards are adequate as they stand at the moment. However, we would suggest that is an area that needs some further consideration.

Ivan Hancock: On competition law, trading standards does not really have any involvement at present, so I have nothing to add there.

Chair: Can I just bring in Brian Binley now under redress?

Q128 Mr Binley: Gentlemen, I need your help. I want to set a Select Committee record; I want to see if I can get a yes/no answer from each of the four of you and, if that is the case, I will go down in the annals of this House. On that basis, under the draft redress scheme, it is up to the enforcers to assess the loss suffered by consumers, the cost the business will be subject to and the administrative costs of the enhanced consumer measures. Would it be more appropriate for the business that is subject to the order of undertaking to be responsible for its investigation, consultation and the provision of information, as is the case in the Financial Services and Markets Act model? Help me, gentlemen-yes or no?

Andy Foster: Yes.

Ivan Hancock: Yes.

Paul Gurowich: Yes.

Gordon Ashworth: Yes.

Mr Binley: Thank you.

Chair: You are in the annals of parliamentary history, not for the first time. Can we conclude now with a question from Katy Clark?

Q129 Katy Clark: It is about education. A strong theme in the evidence we have received is that the draft Bill does not meaningfully address consumer or business education about consumer law. Has the Government taken a sufficiently proactive role in ensuring that adequate education is available for consumers and business? Maybe you could expand on that, in terms of how you think it should work, if you have ideas about that.

Andy Foster: I am happy to start on that and colleagues will supplement. I have yet to see plans for how particular aspects of this Bill will be implemented, although we are engaging with the Bill team about our specific role. Colleagues and the Committee may be aware that we have a specific mandate for what we call business education. This is a modest grant that we receive from the Business Department, which allows us to educate businesses on their obligations towards consumers. This is particularly around the sale of goods and services-the sorts of obligations that are in this Bill.

We have made the point quite clearly to the Department that, while that is fine in terms of an ongoing basis-we will build a website that will contain certain leaflets and there will be certain elearning opportunities for businesses-we think that this Bill is so different that it requires a specific campaign. That works both ways for consumers as well. For consumers, Citizens Advice will have that responsibility, particularly the paidfor responsibility, at least, in terms of educating consumers.

It has been a frustration for trading standards officers for a number of years that there is a patchy approach to how schoolchildren and young people are trained in consumer rights, in terms of how that is dealt with in the curriculum, but that is a wider point. The basic opinion is that we would like to see a bigger investment, and I realise that it is easier said than done, in terms of a specific campaign. Only when we have a balance between the majority of businesses understanding their obligations and consumers who are aware of their rights, and therefore are able to stand up for their rights, are we able to unlock some of the benefits that we see articulated in this Impact Assessment. If we have a situation where only a small proportion are aware of their rights and obligations, none of those benefits will be unlocked.

We realise that there are a number of consumer organisations and thirdsector groups that will also play a part in campaigning, but I think it needs more of a joinedup approach and proper investment, just like we would see in other areas, for example financial services compensation and some medical issues for which we see paidfor campaigns. That is exactly what this Bill needs.

Ivan Hancock: I would absolutely support that. What people do not realise sometimes is that local authority trading standards services have no specific funding to deal with the education of consumers, but it is in our interests to ensure that consumers and businesses are aware of what we are trying to ensure compliance in. For something as simple but as important as this new 30day rule, if most consumers do not understand that, the point of the Bill is lost. Most people do not understand their rights now, so a lot of time is wasted.

This Bill seems to be seeking to clarify and ensure confident consumers and informed businesses can make things happen more effectively. It is hard to see how that will happen without proper investment, through whoever needs to do it. From a consumer’s point of view, Citizens Advice seems to be a laudable route to do it, as the Government has chosen. Through the business route, the Trading Standards Institute has been selected to deliver that as well, and we just want those things to happen.

Gordon Ashworth: If I can just add to that, although OFT is no longer the lead on consumer education-that is Citizens Advice and, as Andy has explained, business education is now with TSI-we did a lot of work researching the drivers of business compliance with consumer law, a couple of years ago. From a consumer perspective, consumers exercising their rights can change business behaviour. They can affect markets. This is a fantastic opportunity, with a whole range of new consumer rights, to really drive that forward. The consumer education part is vital.

Businesses have told us that they welcome guidance. They do value it, but it has to be targeted: it has to be in the right form; it has to be useable, because it competes with lots of other things they are trying to do and lots of other guidance they have to absorb. For example, we have developed some online resources, "hubs" as we call them, for sale of goods, distance selling and unfair terms legislation. This is material that can be read online or it can be extracted and used in training materials. We think that is the way to go and a valuable way to engage business and help them comply with the law. Yes, both elements are going to be crucial.

Andy Foster: If I may just add to that last point, there are some excellent resources out there, and indeed we will continue to build good resources. The challenge is driving people to the resource: websites, leaflets or elearning material-whatever it may be. We can build them all, but the investment that we are talking about needs to drive traffic to them; that is the costly bit, and we have not seen work start on solving that challenge.

Q130 Chair: Can I just conclude by saying: do you think there is an argument for just having one organisation owning this particular area and, if so, which organisation? Perhaps again some short answers would be welcome there. Could we start with you, Andy?

Andy Foster: Can I just clarify? Are you talking about education here?

Chair: Yes.

Andy Foster: We are not going to break the record here in terms of a yes/no answer, but I do not necessarily subscribe to the suggestion that that would take us to a better place. We have a very clear landscape going forward of two pillarsTrading Standards and Citizens Advice-leading on two different education elements. Of course, when we are dealing with our target markets-for us it is around businesses and particularly around small and mediumsized businesses-that takes a different skill set from the one that is required to educate consumers of all ages. Even then, you can segment that down into different needs of what consumers need at any point in their lifetime. Because we need two different skill sets, it is appropriate that there are two different organisations.

We are quite used to dealing with businesses. It is what we do, day in, day out. Therefore, it was part of the thinking behind Government asking us to lead on this project. The reason why I am reassured that it does not go off in two different directions is that we all sit together through the Consumer Protection Partnership, which is an arrangement where Citizens Advice, Trading Standards, the CMA in the future and others come together to discuss strategic issues of emerging risks. That is where we can close any gaps that may be in the system. I am quite happy that the model we have at the moment is working, or will work.

Chair: Basically, one for business and another for the more general individual consumers.

Gordon Ashworth: As the leads on that, yes, but as you have seen today and from other hearings, the range of expertise is broad in the system. That needs to be tapped into, and there are different channels to deliver these messages to consumers and business, and subdivisions within that. One size will not fit all; it will need some joint consideration.

Ivan Hancock: We recognise that local authority trading standards officers have the contact with businesses. It is through trading standards and the Trading Standards Institute that that advice is best put or made available to businesses, as consumers are slightly separate and there is a separate set of contacts. Obviously, it is important that what the consumers are being told and what the businesses are being told are coordinated, such that they are not getting slightly different views of the same bit of legislation.

Chair: Thanks very much. That concludes our questioning. I will say what I always say to panels at this stage. If you feel that there is evidence that you should give but did not have the opportunity to give, please feel free to write to us in a supplementary body of evidence. Equally, if we feel there is a question that we should have asked you but did not, we may write to you and would be grateful for a reply. Thank you very much. That was very helpful indeed.

Prepared 20th December 2013