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9 Jan 2007 : Column GC39

Grand Committee

Tuesday, 9 January 2007.

The Committee met at half-past three.

[The Deputy Chairman of Committees (Lord Elton) in the Chair.]

Consumers, Estate Agents and Redress Bill [HL]

(Second Day)

The Deputy Chairman of Committees (Lord Elton): Perhaps I may remind noble Lords that if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.

Clause 13 [Reference of matters to the Gas and Electricity Markets Authority]:

On Question, Whether Clause 13 shall stand part of the Bill?

Baroness Miller of Chilthorne Domer: After what I hope was a pleasant Christmas break for everyone and with wishes for a happy new year, including to the Minister and his team, we return to the question of what is the point of this Bill. It aims to abolish Energywatch, Postwatch and the National Consumer Council, and to create a new National Consumer Council which will subsume the duties of those bodies. In opposing the Motion that this clause shall stand part, we question the wisdom of abolishing Energywatch and ask the Government to make their case for doing so. In asking that, I want to make a number of points, particularly given that the energy market is going through a volatile phase at the moment.

Any consumer can tell you that they feel under considerable pressure to switch energy suppliers, which is a recognised way of saving money on fuel bills. However, very clever people out there who are not directly employed by the energy companies but hired at second-hand in what I might describe as a pyramid-selling scheme through firms in the pay of the energy companies, go around organising the switch of customers from one account to another. This rather febrile atmosphere has lead to a situation where in our view consumers need as much protection from a body like Energywatch as they can get. My central question to the Government is this: is the new body, one that may dilute the expertise of Energywatch and which will have split functions in terms of complaints and advocacy, really going to be a better solution as regards consumers?

I can understand that the DTI wants to streamline things and save money, and that is a perfectly admirable aim. However, if by doing so the Government save themselves a little money while the process costs consumers considerably more simply because they will not have such a good body representing their interests, I do not believe that that

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is to their benefit. We only have to look at the work of Energywatch on smart metering to realise that what it does can have considerable benefits for consumers. It would be a terrific step forward if the Government were to take Energywatch’s comments on smart metering firmly on board and progress the issue. Consumers would gain because they would be able to reduce their fuel bills by introducing better consumption patterns rather than just switching from one supplier to another. That contributes nothing in terms of tackling the issues around carbon emissions. Smart metering can provide a win-win situation in which consumers save money and the environment suffers from fewer carbon emissions. Energywatch has made a strong case for the Government to make a move on smart metering and, indeed, for Ofgem to take this on board.

My fear is that this kind of work, which benefits consumers and the climate-change agenda, will not fall into the remit of the NCC in the same way as it falls into that of Energywatch. It empowers consumers to do what they cannot do at the moment: that is, to sell the surplus energy they create through micro-generation back into the grid. Indeed, suppliers of energy could save on costs because they would have reduced contact and would not need people going around reading meters.

Finally, the biggest plus from the point of view of Energywatch is that the huge number of difficulties over billing would disappear because the smart meters would feed the information back directly to the energy companies. Many bills are estimated and incorrect bills cause great difficulties, but cases such as those to which we referred on the first day in Committee would disappear as a result of smart metering. If the Government continue down the path of abolishing Energywatch, which I believe they intend to do, perhaps a very good legacy of the work done by the staff of Energywatch to date would be for the Government to make a move to ensure that smart meters are brought in.

Lord O'Neill of Clackmannan: This is a rather pointless amendment but, none the less, it should be addressed. As far as I can see, we have an argument in favour of smart metering which is totally irrelevant to anyone who has had any dealings with Ofgem in the recent past. Meters were made to last and they will last for 40 years. It would cost an incredible amount of money to get rid of all of them. It would be possible but the carbon effect involved in the manufacturing of their replacement would greatly outweigh the savings to which the noble Baroness has alluded. She surely wants to read again and think about this part of her brief. It is a great idea but it would cost an awful lot of money. The cost would have to be borne by consumers who, frankly, balance up the advantages to the environment against the advantages to their own pockets.

While smart metering has, to an extent, been tried in Northern Ireland with the blessing of Energywatch and the regulators operating over there, I am not sure that that is the best argument for it if we are going to abolish our consumer protection body which I think

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most people will agree has been fairly effective. Consumers have confidence in it, the regulators get annoyed by it and the companies do not really like it. By and large those are three substantial ticks in the boxes. If the regulators feel at times uneasy because the consumer watchdog keeps spurring them on to do other things, that is a good argument for the watchdog. There should be an atmosphere of creative tension between the two. If the companies find it uncomfortable, the regulators are doing their job.

The test is whether this is only about saving money. If it is not, we have to give it a fair wind. I think that part of the problem we have with the energy industry in this country is that successive Governments—certainly the previous Conservative Administration when they privatised the energy industries—gave precious little thought to liberalisation and effective means of consumer protection. They did not think through anything other than the amount of money they were going to get through the privatisation sell off.

We are slowly but surely picking up the pieces. As we have seen, consumer protection can take a variety of forms but, in large measure, the reforms that took place in the early part of this century tidied things up a bit, but you still had regional committees with varying powers in different parts of the country.

Equally, we had a National Consumer Council that was certainly not a giant but which was sleeping a fair bit of that time. Those of us who have watched consumer affairs from down the Corridor were not greatly impressed by the record of the National Consumer Council. It was barely reactive and only rarely proactive as a body. In recent years, it has improved its game somewhat, but it still has an awful lot to do. If it is reinforced by people from Postwatch and Energywatch, who have shown themselves to be effective representatives and defenders of the consumer, we will begin to see something happen.

On energy matters and postal matters—I know that we will go on to look at postal matters in a moment, but I think that the two can be taken together—there has been effective consumer representation. There has not been that kind of effective consumer representation by the National Consumer Council. It has commissioned worthy studies; it has made general points; but it has not made many businesses fear its activities or made their flesh creep. Energywatch has certainly done that for a number of energy companies.

I am concerned that the momentum that has been gathering in the past few years as a result of Energywatch’s actions should not be stopped. Later this afternoon, we will be looking for assurances on specific matters, such as the speed with which consumer complaints should be addressed. Although the Minister gave us assurances on Second Reading, we need rather more substantial detail and flesh on the bones than that. The test of the Motion is: if the Government cannot give assurances, the clause may later be voted down. If it was, that would probably wreck the Bill, so it would become, instead of a probing amendment, a wrecking amendment.

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The Minister has a case to make and I hope that he will be able to make it this afternoon. It is, at least in the first instance, that we have a new body of which the umbrella will be the National Consumer Council, that it will initially take in the functions of Energywatch and Postwatch and will ultimately include water as well. If it is that successful, it may persuade the Treasury that it can take in financial services later. That is for other legislation because it is not within the Bill, although I have to say that if it is a sufficiently good idea for energy, in my view, it is a good enough idea to include financial services in something independent of the Treasury—although you might say that in any Government few things are independent of the Treasury.

If there is an argument for the Bill, it is that it will continue the necessary shaking-up process of the National Consumer Council, but it will also bring energy matters into the mainstream of consumer issues. There are some specific problems—metering, people knocking on doors, switching and so on. Although in most other areas people switch between one service provider and another, in utilities, it is a wee bit different. But if we are to have an argument about switching and say that it should be a function of the National Consumer Council, why do we not include telecoms in the Bill as well? Telecoms are still a shared function between the DTI and the Department for Culture, Media and Sport. There is an awful lot of untoward activity against consumers in that area, but at the moment we have an organisation that, frankly, I believe to be far too close to Ofcom to be doing its job independently.

My only concern about the absorption of Energywatch and Postwatch into the National Consumer Council is that it becomes a wee bit too close to some other operations. That is what worries me because we must ensure that in their new form those consumer bodies continue to be able to act independently against companies when a challenge has to be made. They do not necessarily need to have a confrontational approach all the time, but, let us face it, energy companies in the United Kingdom are not bywords for philanthropy. They have to be challenged, harried and held to account. So far, Energywatch has not done badly in that regard, while the record of the National Consumer Council has been less than compelling in its ability to have a go at some of the big abusers of market power in Britain. Therefore, I am happy to give the Government a fair wind on the amendment, which I know is probing. Does the noble Baroness wish to intervene or ask a question?

3.45 pm

Baroness O'Cathain: I would love to ask a question. The noble Lord’s arguments are well thought out and he knows the subject fantastically well; but I am worried about the flexibility and correctness of what Energywatch has been doing. The noble Lord rightly said that it has been very good and in the previous Sitting of the Grand Committee we were given a good example of its flexibility. But if the National Consumer Council is a fairly moribund, inflexible and reactive, rather than proactive, organisation, how does the noble

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Lord think that the people who currently work in Energywatch or the new consumer council for water—with whom I am very impressed and are light on their feet—will feel about being subsumed into a moribund, reactive organisation? If I worked for Energywatch, I would not be happy about that at all and I might wish to pack my bags and go away. There is a chance that some of the best people in those organisations who have been running their own operation brilliantly would say, “Oh well, forget this—I am not going to join this organisation”.

Lord O'Neill of Clackmannan: I thought that I had qualified my criticisms of the National Consumer Council by saying that until fairly recently it was a bit of a sleeping dwarf. Excuse my sizeist language, but, at best, it under-punched its weight considerably and was not very effective. Of late, it has been far more effective and far more proactive. The injection of individuals from Postwatch and Energywatch could well carry on that process and add a dynamic to it. The idea that we should segment the consumer protection industry, as it were, is dangerous, because there are degrees of overlap in a number of areas and the degrees of expertise are common to many utility advocacy roles. It is possible to create a seamless organisation.

For the moment, segmentation will continue in other areas, but there is a case to be made for further energising—perhaps I should use a better word—further injecting some urgency into the activities of the National Consumer Council, which has come a long way in a comparatively short time, along with Postwatch and Energywatch. Postwatch is a relatively new body, as is Energywatch. A number of people will leave, but there is always a turnover in such organisations and I imagine that a number of people will be interested to see what the new body is like and will hang on for a bit longer. Others will have been looking for a chance to leave and are taking it now. When you bring together public bodies, there will always be a degree of shake-out. All I can say is that while I do not expect us to have a vote on this amendment—we do not behave like that in these Committees—it should be rejected and the Government should be supported on this issue, with the qualifications that I have expressed.

The Deputy Chairman of Committees: I remind your Lordships that this is not an amendment. The Question is that Clause 13 stand part of the Bill. As many as are of that opinion will say, “Content”. The Minister is going to reply—I thought that he sat down and did not want to.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Truscott): It is not normally the practice for us to have votes in Grand Committee, but I am new so I do not want to comment. I join the noble Baroness, Lady Miller, in wishing noble Lords a happy new year. Everyone is looking much chipper and keen to get on with the Bill, so I shall proceed.

I thank the noble Baroness for raising issues such as smart metering and itemised billing in energy, because this is one of the areas that the Government are looking at as part of the energy review process,

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and we will be looking in detail at those measures. This is the second day of Grand Committee. My officials and I have looked very carefully at the report of the first day in Hansard, and we are doing our best to meet many of the concerns that were expressed on that day. We do listen very carefully to what noble Lords have to say during proceedings.

One or two specific issues were raised initially on Energywatch. We intend the sectoral expertise of Energywatch to be guaranteed as part of the new NCC. There is no intention at all to diminish the role of a body that represents consumers of energy. The new NCC will continue to carry out the sectoral functions currently undertaken by sectoral consumer bodies such as Energywatch. As I said, there is no intention of diminishing the role that Energywatch currently plays when it adopts its new form and is subsumed into the NCC. I also reassure my noble friend Lord O’Neill of Clackmannan that there is no intention of presenting this as a money-saving measure. That is not the intention; the intention is to have a more coherent advocate for consumers across a range of areas.

My noble friend also mentioned telecoms. The telecoms industry currently has a consumer panel, and when the Government looked into which sectors representing consumers should be incorporated into the NCC, they saw that telecoms had an independent regulator with powers and duties to protect consumers and teeth to sort out suppliers, an independent consumer panel to advise on specific issues, and an industry-funded independent ombudsman. In that sense, it already has a very good structure, so it is not felt appropriate at this stage to incorporate it into the NCC.

On the general issue of Clause 13, I am grateful to the noble Baroness, Lady Miller, and the noble Lord, Lord Razzall, for tabling the Question and thus for the opportunity to debate this important clause today. I am pleased to have had the benefit of the insights of noble Lords who have already contributed to the debate. In speaking to the clause, I draw attention to the importance that I attach to preserving the very best elements of the current arrangements, especially where they provide important powers that can be used to the benefit of consumers. In markets with a sectoral regulator, that regulator has great responsibilities to ensure the proper operation of the market and to ensure that licence holders conduct themselves appropriately in line with their obligations under the licences, codes and agreements. This is in the interests of consumers. Indeed, the primary statutory objective of the Gas and Electricity Markets Authority in carrying out its functions is to protect the interests of consumers. This is what the clause refers to. To back up its statutory objectives, the authority has enforcement powers that enable it to secure compliance with the important obligations placed on licensees in the energy sector.

We need to preserve the ability of the authority to bring to bear its powers in support of the consumer interest, and in aid of that enforcement role, by making provision in the Bill for the council to alert the authority of issues within its regulatory remit wherever appropriate and necessary. That is what the

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clause currently delivers for consumers; it focuses on resolving problems in the most effective way. Where the regulator has enforcement powers in respect of the complaints made by the consumer, it is sensible to ensure that the regulator is aware of that complaint and has the opportunity to use such powers to resolve it.

That position is not different from the current one, and we are keen to maintain proper and effective means to address consumer detriment. Consequently, Clause 13 makes provision for the new council to refer a complaint made under Clause 10(1)(a), or one to which Clauses 11(3) or 12(1) apply, to the Gas and Electricity Markets Authority, where the new NCC considers that the authority’s regulatory functions may be exercisable unless the authority is already aware of the matter. Where a complaint is made under Clause 12(2) in respect of gas or electricity disconnection and is referred by the council to the authority, the council is not obliged to investigate the complaint until the authority has had a reasonable chance to exercise its enforcement functions.

The clause provides for the council to notify a complainant if the council considers that a complaint referred to it relates to a matter that can be referred to the authority under existing legislative provision. This ensures that the complainant is informed of the most appropriate route for effective resolution of the problem. The clause, as it stands, is currently a good one, and will ensure that consumers are adequately protected.

Baroness Miller of Chilthorne Domer: I realise we are not debating an amendment, so I am not making a reply. I simply wanted to make a point at this moment. I am grateful to the noble Lord, Lord O’Neill, for his contribution. He said this was a pointless amendment, but without it we would not have seen the expertise he subsequently displayed to us. The Minister’s comments, that he and his officials are considering the points we made on day one of Committee, are helpful. For us, given the comments during the debate on this clause, the most effective way of ensuring that the new body has teeth remains to convert those contentious “mays” to “must” or “shall”. That issue remains at the heart of some of our concerns about Energywatch and the other bodies that we shall debate shortly.

Clause 13 agreed to.

Clause 14 [Reference of matters to the Postal Services Commission]:

On Question, Whether Clause 14 shall stand part of the Bill?

Baroness Miller of Chilthorne Domer: Here we move to Postwatch. Many of the arguments are similar to those regarding Energywatch, so I will not rehearse the generality of those. I will just say that the need for sectoral expertise is just the same, and we are worried about expertise being lost in the move. As the noble Baroness, Lady O’Cathain, said, are those staff with particular expertise, drive and enthusiasm going to make the change?

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The postal sector is in as much of a state of flux as the energy sector; perhaps even more so, in the sense that some of what is happening is so much within the Government’s remit, as they decide through whom services should be available. My noble friend Lady Thomas of Winchester will speak about post offices in rural areas, so I will not dwell on that issue. I shall simply say that, coming from a rural area, I am reminded weekly—I am not there every day—how much people in such areas rely on those services.

The postal sector is experiencing new operators and service providers coming into the market. Royal Mail is assessing many of its products and services and the changes have seen the introduction of pricing in proportion, for example, and the greater use of automation systems. Such changes mean that consumers need to understand what is happening. With the changes in post office closure times and so forth, they need a strong body to ensure that the information on their effect on consumers is gathered effectively and is then used to inform policy changes.

It is also important to remember that the postal sector deals not only with domestic consumers; there are also business consumers. They too have strong concerns and it would be useful if the Minister could comment on the way in which the new body will relate to the regional agenda. As yet, we have talked mostly in national terms but the pressures in metropolitan and rural areas are different. In the south-west, compared with the south-east, regional bodies will collect different, critical information. I hope that the clause-stand-part debate will enable other Members of the Committee to say how they feel on this issue, and in particular enable the Government to make clear their stand on it.

4 pm

Baroness Thomas of Winchester: I want to speak to the Question whether Clause 15 shall stand part of the Bill. It deals with investigations relating to public post offices. Postwatch has provided an invaluable analysis of the problem the post office network faces not just in rural areas but in many urban deprived areas too, and it has made some important suggestions. It wants investment, tied to reform, in rural post offices to be extended beyond the current cut-off date of April 2008 and for that investment to include urban deprived branches.

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