Chapter 4: The Government’s approach to consumer protection and Brexit
Government engagement with stakeholders
42.Witnesses were concerned by the lack of prominence given to consumer protection by the Government in its public plans for Brexit. Which? said that they were “surprised” that the issue was not covered in the Government’s February White Paper, and “that it was not one of the [Government’s] 12 negotiating principles”. Mr Moorey called on the Government to add the subject matter as a “13th principle for the negotiations, which should endeavour to maintain and enhance consumer rights”.64
43.Matthew Upton, of the Citizens Advice Bureau (CAB), argued that during the negotiation period the Government “needed an ongoing dialogue with organisations like us”. He said that it was “absolutely essential” that the Government went out and talked “to consumers directly to hear their concerns”.65
44.Dr Steedman of the BSI did not believe that the “standards dimension is well understood or even visible” to the Government. He said that he had “good relations with individual civil servants in different departments”, but “we have surprisingly little connection with Ministers”. He confirmed that the BSI had offered its support to the Government during the Brexit negotiations, in order “to ensure that we avoid sleepwalking into problems”.66
45.Mr Lewis Shand Smith, of the Ombudsman Services, expressed similar reservations: “It does concern me that the Government do not seem to be aware of the consumer protection that comes through our membership of the EU”. But while he was “nervous” that the Government had not yet addressed the issue in public, he believed that it did “have it in mind”.67
46.Mr Roland Green of the CMA, was less concerned when giving evidence in September 2017: “I am aware that the Government are aware of the importance of the rights of consumers”.68
47.The Minister said that she respected the views of the “well-informed and active groups” who gave evidence to us early in our inquiry. But she pointed to recent “significant efforts” by her Department “to engage with consumer organisations” on Brexit. She sought to reassure us that “their responses to [our] inquiry point to the need for us to engage in a more regular and systematic manner than we have done hitherto”. She promised that consumer groups would be invited to meet the Government a “little more regularly on a systematic basis”.69
48.At the outset of our inquiry, witnesses were clearly concerned that the Government had not yet engaged sufficiently with bodies that deal with consumer affairs. However, by September, when the Competition and Markets Authority gave evidence, there was a marked change in tone and the CMA suggested that the Government had improved its contact with relevant stakeholders. This increased level of engagement was confirmed by the Minister in October.
49.We welcome the Minister’s and the Department’s promise to engage with stakeholders and consumer groups throughout the Brexit process on a regular and systematic basis, and hope that they are able to fulfil this wish.
The utility of the European Union (Withdrawal) Bill
50.In March 2017 the Government published its White Paper Legislating for the UK’s withdrawal from the European Union. In a section that addressed consumer protection specifically (see Box 9), it promised that the so-called Great Repeal Bill would “preserve the relevant EU [consumer protection] law to ensure that domestic law functions properly after exit … It will help ensure that UK consumers’ rights continue to be robust after we have left the EU”. What is now the European Union (Withdrawal) Bill is currently making its way through Parliament (see Box 10).
Box 9: Legislating for the UK’s withdrawal from the European Union: Consumer Protection
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In its March 2017 White Paper Legislating for the UK’s withdrawal from the European Union, the Government said: “UK consumer law predates EU competence in this area, and goes beyond EU minimum requirements in a number of respects. For example, the right for UK consumers to reject a faulty good within a 30-day period is a UK-level protection, and traders are limited to a single attempt to repair or replace a faulty product before having to offer a refund. In addition, the UK has legislated to make sure that consumers have clear rights when buying digital content. “Where consumer protections are set at the EU level and thus already part of UK law, the Great Repeal Bill will preserve the relevant EU law to ensure domestic law functions properly after exit. This stability will give businesses and consumers clarity and confidence in their rights and obligations, facilitating the day-to-day transactions that keep the UK economy strong. It will help ensure that UK consumers’ rights continue to be robust after we have left the EU.” |
Source: Department for Exiting the European Union, Legislating for the UK’s Withdrawal from the European Union, Cm 9446, March 2017: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604516/Great_repeal_bill_white_paper_accessible.pdf [accessed 20 November 2017]
51.All our witnesses welcomed the Government’s aspiration to continue robust consumer protections after Brexit. But they also raised concerns.
52.Mr Chris Woolard of the FCA welcomed the Bill as “a sensible approach”,70 and stated that “the idea is to onshore the protections that UK consumers have today”. He believed that “in theory it should not open up any further risk to UK consumers than might exist today”.71 He argued that the Government’s “ambition” of ensuring robust consumer protection rights post-Brexit was “broadly capable of delivery”, but he warned that the “act of onshoring will not solve all the problems”. For example, he noted that at present UK consumers who purchase faulty products from firms operating in other Member States can access the compensation scheme in that other EU state, but he was not “sure how onshoring can automatically protect that right”.72
53.Mr Pete Moorey of Which? said: “We are very pleased … that in the great repeal Bill White Paper there is a strong commitment to consumer protection and consumer rights”.73 He suggested that “it is entirely practical for the acquis to be lifted and shifted … and to be adopted into UK law”.74 However, while he was “pleased that the Government have committed to lift and shift these important protections and to put them into UK law”, he was concerned that “there should be no watering down of those rights”.75 He did not want to see “Brexit being used as an opportunity to deregulate very important existing consumer protections”.76
54.Which? concluded that the “critical element” of the Government’s plans for dealing with Brexit must be “enforcement”, and “ensuring that enforcement agencies have the powers to take action when breaches of consumer law are found”.77
55.Mr Lewis Shand Smith suggested that there “might be a public revolt” if the Government used Brexit as an opportunity to reduce current consumer protections in the UK, and predicted that “newspaper commentators and the media who produce consumer programmes will highlight this, and that would be very uncomfortable for the Government”.78 The “big issue” for him was “how can we develop and maintain cross-border protections?”. He suggested that “we need to find ways to do that that are good not only for British consumers but for those who are selling goods and services into the UK and want to do so into other European member states”.79
Box 10: The European Union (Withdrawal) Bill
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If the European Union (Withdrawal) Bill only repealed the European Communities Act (ECA) 1972, some EU law that currently applies in UK law by virtue of the ECA would cease to have effect, because the Act is not itself an originating source of EU law, but is rather the “conduit pipe”80 through which EU law flows into UK domestic law. Section 2(1) ECA provides that directly applicable law (such as EU Regulations) has effect in UK law without the need to pass specific UK implementing legislation. If the ECA were repealed and no further action was taken, this directly applicable EU law would cease to apply in UK law, leaving gaps on the statute book. Other types of EU law (such as EU Directives) have to be given effect in the UK through domestic laws. This has generally been done using section 2(2) of the ECA, which provides ministers, including in the devolved administrations, with powers to make secondary legislation to implement EU obligations. If the ECA were repealed and no further action was taken, all of the secondary legislation made under it would fall away and cease to be part of the UK statute book, leaving significant gaps. To avoid such gaps, the Bill converts the body of existing EU law into domestic law. After withdrawal, because the supremacy of EU law will have ended, Parliament (and, where appropriate, the devolved legislatures) will be able to decide which elements of EU law to keep, amend or repeal. This body of converted EU law and preserved domestic law is referred to in the Bill collectively as ‘retained EU law’. This approach means that, as a general rule, the same rules and laws will apply on the day after the UK leaves the EU as before:
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Source: Explanatory Notes to the European Union (Withdrawal) Bill [Bill 5 (2017–19)-EN]
56.Matthew Upton of the Citizens Advice Bureau (CAB) described the Bill as “fantastic” and a “great start”, but he warned that “if the cross-border agreements are not there to back it up it is not worth as much as it would suggest”.81 Given the “complexity” of this area of European cooperation, he raised “the potential concern that things could … be subtly unpicked over the next couple of years”.82
57.Mr Leon Livermore of the Trading Standards Institute fully supported “the Government’s stated aim not to lose any of our current protections”,83 but warned that “legislation is just a starting point” because EU cooperation on consumer protection was “underpinned by the mechanisms that we put in place, mechanisms that we co-invest in with European partners”.84
58.The Minister described the EU (Withdrawal) Bill as the “main vehicle for transposing EU law into British law”. In her view, on the day after Brexit, UK consumers “will start … with exactly the same protections in place”.85 She explained that “at the moment under [the Bill] any UK consumer will have the same rights” and, in those instances where UK consumers “have purchased something cross-border”, she said that the “UK system will guarantee those rights”.86
Conclusions
59.All our witnesses praised the Government’s commitment to robust consumer protection rights post-Brexit and welcomed the European Union (Withdrawal) Bill as the means for achieving that end. The weight of our evidence suggests that the consumer protection acquis can be incorporated here via the Bill.
60.We also welcome the Minister’s promise that the UK system will guarantee the rights of those UK consumers who have made cross-border purchases. However, a significant question remains about the protection and enforceability of the consumer protection rights of those UK citizens who visit the EU27 post-Brexit. We ask the Minister to address this specific point in the Government’s response to this report.
Minister’s response to the risk of a reduction in the UK’s consumer protection standards
61.When we put witnesses’ concerns that Brexit might be used as a pretence for reducing consumer protection in the UK to the Minister, she replied: “I can think of nothing that we would be happy to abandon … I can think of nothing that we would want to leave behind”.87
62.The Minister emphasised that the Government was “keen to assure everybody that there will be no dilution [of consumer protection rights] on account of our leaving the European Union”.88 She argued that this area of EU law was “probably more set than in others”, adding that “I am quite certain that none of my colleagues in government wish to see the process of Brexit result in a reduction in consumer protections and rights”.89
63.Looking beyond Brexit, the Minister said that “it will be up to the UK Government to ensure that there is no dilution of consumer rights, standards and protections”. But she did not “think that achieving that happy state is dependent on either membership of the European Union or cooperation with it”. She concluded that if, for example, “there were areas of policy where we felt as a country that consumers needed greater protection than the consensus within the European Union was willing to concede”, she would wish “to preserve the right within our own governance to exercise that right”.90
Conclusions
64.The Minister offered us repeated, clear and unambiguous statements that the UK’s departure from the EU will not lead to any reduction in the standards of consumer protection currently enjoyed by consumers in the UK. But she did not address the question of how the Government will maintain access to the cooperation mechanisms that facilitate the protection of European consumers, which are intrinsic to the maintenance and development of standards across the EU. The UK has had considerable influence within the field of consumer protection hitherto, and it is important that its access to this EU cooperation mechanisms should be maintained post-Brexit. We therefore call on the Government, in its response to this report, to explain how it will maintain this access and influence.
Minister’s response to the loss of reciprocal cross-border cooperation mechanisms
65.The Minister said that our witnesses had raised “some excellent points about the importance of ensuring that a good process for regular communication, consultation and exchange is available to us and our European colleagues post Brexit”.91 She acknowledged that “it would be complacent to assume that Brexit poses no threat” to cross-border cooperation on consumer protection, and she hoped that the outcome of the negotiations will “be a very close association and continuing involvement with European bodies” such as the network of national bodies responsible for policing consumer protection operating under the auspices of the CPC Regulation.92
66.The Minister understood that the Government needed to work “carefully and closely … with our European colleagues with regard to cross-border trade and purchasing to ensure that that reciprocity continues” after the UK leaves the EU.93 The Minister expected “the same relationship, if not a closer one, with our European colleagues post Brexit”, but she felt unable “to comment on its exact nature”.94
67.Her “goal” for the negotiations was “that we continue to benefit from the developments within the European Union, and that we are in a position to continue to share our expertise with it post Brexit”. Again, she was unable to “comment on the nature of how we would get to that point because that really is a matter for the negotiations”.95 She concluded that “we want a close association—a deep and special partnership with Europe post Brexit … but the precise mechanisms cannot be identified at this stage”.96
68.She did, however, acknowledge the limitations of the European Union (Withdrawal) Bill, in addressing the many reciprocal arrangements that operate in this area. She understood that this was “the area that is perhaps not absolutely guaranteeable by the UK Government alone”.97
69.Turning to the CPC Regulation specifically, the Deputy Director, Consumer Policy in the Department for Business, Energy and Industrial Strategy, Ms Kirstin Green, described the CPC Regulation as operating “a pretty good system … it is not perfect, but it is pretty good”. She said that the Government’s “high priority is to develop a way to continue a form of cooperation between enforcement agencies post Brexit”, but the detail as to how this might be achieved, would be “a matter for the negotiations about the future deep and special partnership”.98
70.When asked whether the Government intended to make use of the provision in the reformed CPC Regulation that permits cooperation with third countries, the Minister said that “it would certainly be something that my department would advocate”.99 The Deputy Director was more cautious: “While I cannot say that we will be able to negotiate something identical to what we have the moment, our ambitions certainly will be high to negotiate some form of future cooperation for enforcement.”100
71.With regard to the UK’s membership of the EU’s regulatory agencies post-Brexit, the Minister said: “I would hope that we will conclude with the closest possible involvement in all these bodies.” She emphasised that the Government wanted “a close association—a deep and special partnership with Europe—post Brexit … but the precise mechanisms cannot be identified at this stage”.101
72.When pressed for detail as to how the UK would cooperate with the range of agencies operating within the field of consumer protection post-Brexit,102 the Minister replied: “’As close as possible’ would be the only answer that I could honestly give, because … there are many discussions to be had. She continued that “I am sure we all have the greatest respect for those organisations—I know that I certainly do—and we would want to continue a very close association with them.”103
Conclusions
73.The Minister was sympathetic to the concerns of our witnesses about the loss of the EU based reciprocal arrangements that police EU consumer protection law, of which the Consumer Protection Cooperation Regulation is particularly important. Nevertheless, she was unable to provide us with any detail as to how the Government might secure their application to the UK post-Brexit and we question whether the Government has given any thought to finding a solution to this problem.
74.Reflecting the evidence we received throughout this inquiry, both the Minister and the Deputy Director in the Department acknowledged the importance of the Consumer Protection Cooperation Regulation and classed its post-Brexit operation in the UK as a high priority for the negotiations. We agree.
75.We call on the Government to make every effort to engage the provision in the reformed Regulation (which will shortly be agreed by the Council) that encourages cooperation with non-EU Member States.
76.Our evidence also pointed to the important role played in consumer protection by a number of the EU’s Regulatory Agencies. We are concerned that when pressed, beyond advocating a “special and deep relationship” the Minister was unable to offer us any plan as to how the UK might secure access and/or membership of these agencies post-Brexit.
77.We ask the Government to provide us with a clear approach as to how it will secure the UK’s post-Brexit access to the EU’s reciprocal cross-border mechanisms, resources and infrastructure that police European consumer protection standards.
Pressure on national regulators
78.Mr Leon Livermore, of the Chartered Trading Standards Institute warned us that another of the “big challenges” posed by Brexit in the UK was that it “will be such a big focus that we might take our eye off some of the domestic issues facing market surveillance and consumer protection”. He argued that the UK system of regulation “is creaking, and it will not take a lot to push it over the edge”.104
79.Mr Lewis Shand Smith said that “even within the UK at the moment, there is difficulty with enforceability”. He argued that “trading standards in our councils are finding it difficult to provide enforcement at the moment because of cutbacks”.105 He feared that “consumer protection may not be as good as it could be at the moment”, and predicted that “after Brexit it could be worse”.106
80.Mr Pete Moorey of Which? expressed similar concerns: “Trading standards, the Competition and Markets Authority and other agencies … are not working as effectively as they should.” He believed that the UK’s regulators “will be under greater pressure as a result of Brexit”.107
81.Mr Chris Woolard of the FCA agreed that Brexit posed a “very significant challenge for our organisation and the financial system as a whole”. He continued: “It is fair to say that we are going to have to scale up significantly the resource we are spending on the Brexit process.” This, in turn, “will place significant demands on us and we are doing it against a very tight market”. He told us that the FCA were planning how to prioritise resources, so as to “put the right effort into dealing with Brexit”, and concluded that coping with Brexit “is going to be a really significant task for us as an organisation and we should not underestimate it. It will involve some very hard choices.”108
82.The Minister said that our witnesses’ testimony gave rise to “concerns”, but added that trading standards “is the preserve of local government, and it is obviously down to local government to order its priorities and so forth”. Nevertheless, she explained that her Department was responsible for funding a “national trading standards body [that] gives advice to local organisations”, and she had sought to protect this body’s budget. She said that it was “possibly through those offices that we might seek to improve the resourcing available to consumer enforcement prior to Brexit”, although she added that “there has been absolutely no decision or approval as yet”.109
83.The Minister also addressed the post-Brexit role of the CMA: “The CMA’s role will undoubtedly increase and change following Brexit, and it is very unlikely that it would be able to manage that change post Brexit without additional resources.”110
Conclusions
84.We are concerned by the clear evidence from the national regulatory and trading standards bodies that they are already struggling to fulfil their important roles because of financial restraints even before the additional complications and challenges of Brexit. We were particularly struck by the implications of the Financial Conduct Authority’s testimony that coping with Brexit will “involve some very hard choices”.
85.Despite placing the responsibility on local authorities, the Minister seemed sympathetic to our witnesses’ views, but we are concerned that she was not able to offer us any solutions to this important problem. We encourage the Government to come forward with a plan to address this problem urgently.
86.We urge the Government, when it responds to this report, to set out a clear plan aimed at alleviating the pressures on national regulators, and addressing how they will continue to interact in the interests of consumers, post-Brexit, with other national regulators in the EU’s remaining 27 Member States.
80 R (on the application of Miller and another) (Respondents) v Secretary of State for Exiting the European Union (Appellant) [2017] UKSC 5 https://www.supremecourt.uk/cases/uksc-2016–0196.html
102 Principally the European Medicines Agency; the European Food Standards Agency and the European Aviation Agency.