Miss Melanie Johnson (Parliamentary Under-Secretary, Department of Trade and Industry; Welwyn Hatfield, Labour)

The clause sets out the OFT's function to encourage and approve codes of practice produced by a variety of bodies. It sets out the OFT's powers to implement the new codes of practice regime to make it easier for consumers to identify reliable traders, give formal approval to good business-to-consumer codes and encourage such codes. The OFT will be able to oversee the operation of approved codes, withdraw approval from codes that are not operating satisfactorily, and signify approval of codes in any manner that it sees fit, including the creation of a logo and authorisation of sponsors and their members to use it. That will help consumers to recognise approved codes.

It is intended that adherence to a code of practice should ensure good practice by business when dealing with consumers. Only codes that regulate the conduct of members will be approved. For example, a code may contain a redress mechanism or a complaints procedure. A code might also include sector-specific criteria. The OFT will be able to encourage the making and use of such codes of practice that it considers will safeguard and promote the interests of consumers.

The clause clarifies the OFT's powers. It was uncertain whether such powers existed under the Fair Trading Act 1973, which is to be repealed by schedule 26, because that legislation was stated in very general terms. The new regime attempts to build on it and will benefit consumers and business alike. It will make it easier for consumers to find reliable businesses. Good codes of practice are sometimes more effective at solving consumers' problems than recourse to law. Businesses will gain a marketing advantage from OFT approval. It will also help good businesses to distinguish themselves from rogues.

Self-regulation can be a viable alternative to statutory regulation. It is sometimes better for protecting consumers, as legislation can be inflexible and difficult to change. Codes, however, can be changed quickly in response to new unfair business practices that are detrimental to consumers. Regulation can impose unnecessary bureaucracy and additional costs upon business, with the knock-on effect for consumers of increased prices.

With an effective marketing campaign on the value of codes, we believe that businesses in most sectors will want to sign up to approved codes, or to set up codes where they do not exist. We want to enable the widest possible range of businesses to join, including small local firms. The provision will, therefore, allow a range of organisations to be code sponsors, such as local authorities, chambers of commerce, registered charities and the promoters or landlords of shopping centres. Businesses will not have to belong to a trade association to gain the right to use a logo. That will make it easier for small businesses to find a suitable point of entry.

It is time for a new, effective codes of practice

regime that benefits both consumers and business. I therefore commend the clause to the Committee.

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