Examination of Witnesses (Question Numbers
340-359)
Mr Gareth Thomas, Mr Guy Horsington and and Mr Paul
Baker
14 MAY 2009
Q340 Lord Kirkwood of Kirkhope: Can I
start with a couple of process questions just to help me get this
framed in my mind? Speaking for myself, I think the Government's
position is perfectly robust and sensible. You have said clearly
that there are not guarantees and I think people understand that;
it is all about the balance of advantage between partial harmonisation
and full harmonisation. What is the timescale for this? You adverted
earlier to the Swedish Presidency. I bet you a fiver that this
takes longer than the Swedish Presidency. If you asked me to guess,
and I am not a European expert, we are talking about two years
before we come to the real hand-to-hand fighting involved in getting
this pinned down. It is a hypothetical question and it is difficult
for you to know, but realistically when do you think the end game
will arrive where you or your heirs and successors in your department
will get up one morning and say, "Yes, this is to our advantage",
or, "No, it is not to our advantage"? When will that
day dawn, best guess, in your estimation at the moment?
Mr Thomas: In terms of the final end game I
think the timescale you describe of a year to two years is not
unreasonable. My own view now, having been a minister for getting
on for six years, is that the end game on Commission negotiations
is always with you and the hand-to-hand fighting starts from the
minute you agree that a directive is going to be taken forward.
I use your terminology. To be fair to the Commissioner and Commission
officials, it does not feel like hand-to-hand fighting.
Q341 Lord Kirkwood of Kirkhope: Yet.
Mr Thomas: It feels like they are wanting to
do the right thing and they recognise the concerns that we have
and are trying to find ways through that. Genuinely, it does not
feel like hand-to-hand fighting but what you cannot do is sit
back, relax, not engage, not do the work, and that is not the
approach we are taking—
Q342 Lord Kirkwood of Kirkhope: No, I
was not suggesting that.
Mr Thomas:— and I recognise you were not
suggesting that. You are right to say the end game is some way
off and I think it is right that a substantial amount of time,
not just my time but the Secretary of State's time, who was in
the meeting with the Commissioner that I referred to, and officials'
time is spent going through the detail and talking to consumer
groups and business groups in the UK and other stakeholders about
what the Directive potentially means.
Q343 Lord Kirkwood of Kirkhope: I guess
the legal question might be addressed to Mr Baker. If you or your
heirs and successors did get up on the Monday morning in question
when the end game had arrived, do you have the power to stop this?
Mr Baker: I think that is a political question,
to be honest. It is going to come down to a QM blocking minority.
Q344 Lord Kirkwood of Kirkhope: This
is a very hypothetical question, I guess. We would have the power
if we were in a blocking minority but we could not do it ourselves,
so this could all be done over our heads, push into shove?
Mr Thomas: Potentially, but that is not the
scenario that it feels like we are in at the moment, I have to
say. I made very clear where Britain stands on the right to reject,
for example, to the Commission.
Q345 Lord Kirkwood of Kirkhope: Is that
a red line?
Mr Thomas: Yes, it is a red line for us. We
would want to protect the right to reject, absolutely. There is
a considerable amount of work that has been put in on this dossier
by ministers and officials around the right to reject.
Q346 Lord Inglewood: Could I just make
a point in response to Lord Kirkwood's question about whether
or not we could block it, and you said by ourselves we could not,
but equally that means that another Member State that had a differing
view from us alone could not block us? Is that not correct?
Mr Thomas: That is also true.
Q347 Lord Kirkwood of Kirkhope: Can I
ask you to think about the Unfair Contract Terms Directive because
there is an established corpus of law in the United Kingdom that
is really quite highly developed and if, for example, I were a
member of the Financial Services Ombudsman operation, I would
be looking with some suspicion about what might be heading in
my direction if this all happens the way it is currently framed
because they have powers which potentially would be substantially
interfered with. Is the Unfair Contract Terms Directive something
that is sensible for us to think about? Is it potentially another
red line that we might think about, and would we be better off
sticking with the lesser degree of harmonisation and the original
Directive that covers unfair contract terms at the moment rather
than moving as the Directive suggests?
Mr Thomas: We have been working very closely
with the Office of Fair Trading and with the Financial Services
Authority and the Financial Services Ombudsman to go through any
areas of concern that they have. We have already got assurances
from the Commission that national authorities like the OFT, like
the FSA, can continue to be able to publish what is currently
described as "non-binding guidance" on unfair contract
terms. I think the concerns around the powers or abilities of
the Financial Services Ombudsman to act have reduced. Certainly,
we are not being advised that they are as worried any longer about
the potential scope of the Directive and have had some reassurance
about that. This is an area we continue to watch very closely
for the reasons you describe. Can I just go on to the unfair contract
terms point? As you recognised, there is already a list of unfair
terms in the Unfair Contract Terms Directive where there is guidance
given to businesses. What this Directive seeks to do is to provide
a clear list of terms which are considered to be unfair, so not
just the guidance point that is there already but complete clarity
that terms are unfair, and, secondly, to offer a set of so-called
"grey terms" which would normally be considered to be
unfair unless business could provide clarity as to why they were
not unfair in that particular case, so that potentially strengthens
consumer protection still further. We recognise, from the very
point you started with, that we have to go through the detail
on this very carefully to protect our own existing Financial Services
Ombudsman, et cetera, but our sense is that the concerns initially
that the UK had on this are not as great as we had first feared.
Is that right, Guy?
Mr Horsington: That is absolutely right. I would
say that this is a chapter where for other Member States there
is a great deal of concern about full harmonisation and if I were
to make a guess I think this is the most challenging area on which
to get agreement that full harmonisation is appropriate here.
There is a lot of concern from other Member States.
Q348 Lord Kirkwood of Kirkhope: If I
could just come back to your helpful answer about financial services,
are you going through the other organisations that could be affected
in the same way, because there are others in this country with
the same approach, and trying to speak to them individually to
get comfort from them that they are happy with the direction of
travel of the discussions?
Mr Thomas: When we develop our position in response
to particular suggestions from the Commission we talk across Government
with not just government departments but particular authorities.
We have, as I say, worked with the OFT and the FSA in terms of
drawing up our position, so again I hope that gives the Committee
some confidence that there is the aspiration of a joined-up approach
being delivered and followed through on. Obviously, we then try
and download to those key authorities how discussions are going
on within working groups and with other bodies.
Q349 Lord Kirkwood of Kirkhope: Finally
from me, you referred earlier to the black list/grey list system
that is proposed. The responsibility for future-proofing that
will be by a process of comitology and there are some of us that
think that that is a little bit opaque in terms of what might
happen in the future. What is the Government's position on that?
There must be other, more transparent ways, one would think. Some
of these changes, moving unfair contract terms around from black
lists to grey lists and out of grey lists, could have dramatic
consequences in some niche markets, so can we have some comfort
that the process for overseeing the future use of black and grey
lists that the Directive is implementing is going to be sufficiently
sensitive to take care of concerns in the United Kingdom that
might emerge in the future?
Mr Thomas: I think we would be in a fairly similar
place to the Committee on that. We can see the benefits of using
the comitology route but we would still want a substantial role
for Member States in discussions about changes. Far be it from
me, my Lord Chairman, to suggest a recommendation from the Committee's
report, but frankly it would be helpful if you alluded to this
in your recommendations.
Lord Kirkwood of Kirkhope: I think we
get the point.
Chairman: I think this is likely, bearing
in mind what is on the record already in your addition.
Q350 Lord Lea of Crondall: We have touched
on this off and on right through the last hour and it has been
very illuminating, but perhaps I can put this question in my own
terms about clarity of consumer rights and information for consumers.
You wrote to us, Minister, on 26 March, saying that BERR were
developing a consumer rights campaign for launch at the end of
the summer and then there would be a White Paper on consumer policy.
You went on to say that at EU level the proposed Directive would
require Member States to take appropriate action to inform consumers
of their rights. If we take your own proposed statement, will
it be totally inclusive in the sense of all the differences? If
you buy a house, that is different from buying a lawnmower, different
from repairing a cooker, different from a financial service and
so on. You are going to develop a paper which covers everything
but subsumes the European debate within that?
Mr Thomas: If I may separate out the White Paper
from the consumer awareness campaign that we think we need to
do, my sense is that there is some awareness of some rights within
UK consumer law amongst consumers, and I gave the example of the
right to reject, in terms of what the Law Commission found, which
is that about 80 per cent of UK consumers have some awareness
of that right. There are other rights, such as the right to receive
information, that collectively, I am sure, if we sat down and
went into some detail, we could think of that consumers ought
to be aware of. What we want to try and achieve is much greater
awareness of the basic rights that consumers have so that they
have those at the back of their mind when they are buying a service
or a good and are therefore asking the questions in those areas
that they need to when they are going into a shop or when they
are looking online at a particular product or service that they
are trying to buy. You are right when you say that we cannot hope
to spell out every single consumer right for a house purchase
or every single consumer right for a washing machine purchase,
but what we are hoping to do is give greater awareness of the
basic rights that underpin our complex laws so that people at
least have in mind a basic sense of those rights and I hope that
that will help them to challenge businesses when they are trying
to buy goods where they are worried as to whether they really
know what is going on and give them some confidence that if there
are problems they can get those sorted out. We are obviously looking
at the detail of what such a campaign might look like. We cannot
just run it on our own; we have to run it with the support of
business and consumer groups, so we have been talking to different
parts of the business community and consumer groups with that
in mind. I think there is an issue about consumer education more
generally and the extent to which we need to get this into schools,
so we are looking at those issues as well. A White Paper will
inevitably touch on those issues as well as ranging slightly more
widely.
Q351 Lord Lea of Crondall: Thank you.
Can I just ask whether the people drawing up this White Paper
will be assisted in their focus by some sort of survey of what
we think consumers' main problems are? I guess where most people
might go ballistic is when the plumber comes to fix a pipe and
makes it worse and then refuses to do anything about it. It is
all very well to say there is redress but redress is very difficult,
so will you be hitting the points where the consumer really thinks
there is a problem?
Mr Thomas: I hope so. That is certainly what
I am trying to achieve with it, Lord Lea. You can be the judge
of that when we publish it.
Q352 Chairman: You have given us more
than the due time, Minister, for which we are very grateful, but
if I could just return to this question of comitology so that
we have this on record, Mr Horsington mentioned that this was
one of the chapters that was causing problems with other Member
States. The evidence we have received is to do with the fact that
some of this may not be responsive to national cultural issues
and the speed of change. If the solution is comitology what do
you think we should do to ensure that those things are covered
in negotiations about changes of the terms?
Mr Thomas: As I indicated before, we would not
want to accept completely that comitology is the solution. We
want some reassurance about the role of Member States in the process
going forward.
Q353 Chairman: What would you see as
that, so that we are clear on the record?
Mr Thomas: We want to hear what the Commission
is going to propose in a bit more detail.
Q354 Chairman: But if you were proposing
to them what would you be proposing?
Mr Thomas: We have not got down into the detail
on that but there are structures which the Commission can use
to make sure Member States are kept informed and have a proper
way of getting concerns addressed, so in a sense the ball is back
in the Commission's court in this area—
Q355 Chairman: So you are really asking
them questions?
Mr Thomas:— so we will wait to see what
they come up with.
Q356 Lord Inglewood: Would it not be
the case that you want to see the decision-making taken by representatives
of the Council rather than by representatives of the Commission,
and in particular would you think it appropriate for the European
Parliament to have a role in looking at what is agreed?
Mr Thomas: I am sure there is a role for the
European Parliament. They are already heavily engaged in looking
at the detail of the Directive. If you will forgive me for saying
so, I think my job in this particular context is to protect this
particular Member State's opportunity to engage in the process.
Q357 Lord Inglewood: But, in terms of
the comitology process, you want it to be transparent and you
want the decisions to be taken by the Council Member State representatives
and not by Commission representatives? Is that not right?
Mr Thomas: We certainly want it to be transparent
and we certainly want Member States to be very actively engaged
in the process with the Commission.
Chairman: Thank you very much indeed.
Minister, we are immensely grateful that you have given us so
much time. You can see that we are ploughing through this in some
detail. We hope to make our report before the recess. Clearly,
a lot of issues will not have been resolved and it will be fairly
well in the middle of debate, but we are hoping that our report
will help that debate and we hope that it will help the Government
in the way it is taking this forward, so I hope you can look forward
to what we have to say, but again thank you very much for spending
so much time with us.
| 
