Clause 43

Consumers, Estate Agents and Redress Bill – in a Public Bill Committee at 10:30 am on 24th April 2007.

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Standards for handling complaints

Photo of Ian McCartney Ian McCartney Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office

I beg to move amendment No. 60, in clause 43, page 26, line 3, leave out ‘may make regulations prescribing’ and insert ‘must by regulations prescribe’.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

With this it will be convenient to discuss the following: Amendment No. 33, in clause 43, page 26, line 3, leave out ‘may’ and insert ‘shall’.

Amendment No. 34, in clause 43, page 26, line 5, leave out ‘may’ and insert ‘shall’.

Amendment No. 30, in clause 43, page 26, line 7, leave out ‘may’ and insert ‘shall’.

Amendment No. 73, in clause 43, page 26, line 9, at end insert—

‘(3A) The regulations must require a regulated provider to collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.’.

Government amendments Nos. 61 to 66.

Photo of Ian McCartney Ian McCartney Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office

Good morning, Mr. Weir. I shall make comments on the amendments tabled by the hon. Member for Hertford and Stortford (Mr. Prisk) and my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) and I shall explain in detail the purpose of amendment No. 60 and the consequential amendments Nos. 61 to 66. I hope that members of the Committee will first permit me to reiterate the intentions behind parts 1 and 2 of the Bill to set in context what the amendments are about.

The Bill is intended to introduce new measures to strengthen and streamline the current system of consumer advocacy and redress. Our vision of how that new model for consumer representation will work is centred on the case for the new National Consumer Council, which we debated at great length last Tuesday and Thursday, as a strong, independent consumer champion in a position to take a cross-sectoral approach to consumer representation across all markets.

Consumer Direct is an existing telephone and online advice service and has enjoyed considerable success in providing help and advice to consumers with inquiries  and simple complaints. The service will be extended alongside the measures in the Bill to act as a first port of call for consumers in all sectors. It will help consumers in the energy and postal service sectors to progress their complaints about their service providers.

When a service provider is unable to resolve a complaint to the satisfaction of the consumer, redress schemes in those sectors will ensure complaint resolution, as decisions made in the redress schemes will be binding on providers. The schemes will also be able to offer compensation or other forms of redress to consumers if they are warranted. The measures in the Bill are therefore about empowering and protecting the consumer.

The Government amendments will ensure that the regulated providers in the electricity, gas and postal service sectors have in place and operate appropriate and effective internal complaint handling procedures. Consumers will be assured of an approved standard of complaint handling by the regulated providers in the energy and postal services sectors, whoever those providers may be.

Under the new arrangements for consumer representation to be introduced as a result of the provisions of the Bill, there will no longer be a sector-specific consumer body with a complaint handling function for the energy and postal service sectors. Regulated providers in those sectors will be required to take full and proper responsibility for handling their own complaints, which means that service providers will need to take better ownership of complaint handling. It is important that the right incentives be put in place to enable that to happen. Regulated providers are, of course, entirely free to improve standards beyond the level prescribed by the regulator if they so choose.

Consumers will therefore benefit from getting their complaints handled effectively by the regulated service provider to an approved standard, but the regulated providers can also benefit. Recent research undertaken by Ernst and Young found that the retailers that are best able to resolve customer complaints quickly, satisfactorily and with the minimum of fuss are more likely to retain customers than those that do not.

Complaint handling standards have been debated extensively, and I believe that there is no difference between us on it. However, while we understand the intention behind hon. Members’ amendments, they would not fully achieve their desired affects. The Government amendments will place a requirementon the regulators to make regulations prescribing standards for complaint handling. Regulators are best placed to determine what is appropriate and necessary for their sectors, and they must be able to exercise a degree of flexibility in determining what standards should be set, to which complaints they should apply and how they should be enforced.

Amendment No. 61 allows for future changes in the energy and postal service sectors. It provides for the Secretary of State to make an order prescribing a date on which the duty on regulators to prescribe complaint handling standards will change to a power to do so. Before making such an order, the Secretary of State must consult the regulator, the new council and other persons as appropriate.

The amendment is required to allow for future changes in the energy and postal services market that may make the requirement for regulators to prescribe complaint handling standards obsolete. Any decision by the Secretary of State to remove the duty in question will be informed by representations madein the consultation and in particular the views ofthe regulator on the continuing need or otherwiseof the standards. For example, in the postal services sector the UK’s mail market was opened to competition only recently, on 1 January 2006. Over time, stronger competitive pressures might result in greater incentives for firms to deal effectively with consumer complaints in order to win or retain a larger share of the market. When all firms in the market meet or exceed the prescribed standards, the prescription of complaint handling standards might no longer be necessary. I am sure that hon. Members will recognise that that is in line with better regulation principles.

Amendment No. 73, in the name of my right hon. Friend the Member for Coatbridge, Chryston and Bellshill, raises a reasonable point: the need to ensure that regulated providers

“collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.”

I hope that I can reassure my right hon. Friend that that is provided for already in the Bill.

Clause 43(2) provides for the regulator to

“prescribe standards in relation to all consumer complaints, or...complaints of a kind specified”.

Clause 43(3) states that, complaints can be specified

“by reference to the subject-matter of a complaint, or the description of person making a complaint.”

Let us assume that standards prescribed apply to all complaints received. In order to comply with the relevant requirements detailed in schedule 5, and to provide the regulator with information regarding compliance, providers must record all complaints received and standards relating to them.

Schedule 5 to the Bill amends the ElectricityAct 1989, the Gas Act 1986 and the Postal ServicesAct 2000, to require regulators to collect information on compliance with standards, and gives the regulatornew powers to direct its regulated provider to do that. Clause 45 also places a duty on the new council to publish appropriate statistical information about levels of compliance by regulated providers with the prescribed complaint handling standards. For that reason, amendment No. 73 is unnecessary.

On complaints, in a previous sitting of the Committee, my hon. Friend the hon. Member for Ealing, North, raised the question of how complaints about the activities of the new council would be dealt with. The parliamentary health service ombudsman investigates complaints about Government Departments, their agencies and certain other public bodies in the UK accused of having not acted properly or fairly, or of having provided a poor service. The Bill makes provision for complaints about the activities of the new national consumer council to be subject to the same procedure. That is set out in paragraph 37 of schedule 1.

On the basis of my explanations, I hope that hon. Members, including my right hon. Friend the Member for Coatbridge, Chryston and Bellshill, will be minded  to withdraw their amendments, in favour of the Government amendments, which have been designed to address all the issues raised in another place and this Committee.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

Thank you, Mr. Weir. I, too, welcome you to the Chair for today’s deliberations.

Amendments Nos. 33, 34 and 30, which are in my name and that of my hon. and right hon. Friends, are probing amendments. I have to say, on this occasion, I am encouraged that that probing has generated that positive reaction from the Minister. We welcome the Government’s recognition of our view, which has been discussed here and in another place, of the need for effective complaint handling standards. I believe that that is essential for good business service, as he alluded to, and for meaningful reform of consumer redress.

Interestingly, the Government’s regulatory impact assessment relating to the amendments echoes that point. It argues that requiring companies in the energy and postal services sectors to adhere to complaints handling standards will ensure that more customer complaints are dealt with first hand by the regulated provider to the satisfaction of the consumer. So we are at one on the principle, which is very encouraging.

Our amendments seek to ensure that regulators put in place effective standards through the simple device of prescribing “shall” rather than “may”. However, I recognise entirely that, in content and on the nature of the powers provided, the Government’s amendments are more comprehensive, flexible and, indeed, more sophisticated. Again, the regulatory impact assessment recognises that we are dealing with standards and not procedures, which is important. I know that a number of players in the field are concerned about a prescriptive approach to procedures, so that is understandable. However, that is not what we are debating. The Government propose to establish standards. How each company responds to that will be up to them. Good companies with good procedures in place have nothing to fear from the amendments. On that basis, I am pleased that the Government have recognised the strength of the argument that we put both here and in another place, and I will be more than happy to support the Government amendments. I will not, therefore, press amendments Nos. 33, 34 and 30 or, in due course, amendment No. 36 to a vote.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

Mr. Weir, I am grateful for the opportunity to speak to amendment No. 73. Let me start by agreeing with my right hon. Friend the Minister that amendment No. 75 is not necessary, not least because, so far as I can see, it does not exist. Before my right hon. Friend rises—

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

I am grateful. That was a test of Hansard, because I notice that last week the Minister’s jokes had “laughter” added after them. I look forward with interest to the next publication.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

I am always grateful for my right hon. Friend’s support. He does not realise how appropriate that test would have been this morning.

Let us return to amendment No. 73, before we test your patience any further, Mr. Weir. That would insert:

‘(3A) The regulations must require a regulated provider to collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.’.

I am half convinced by what the Minister has said. However, those who advise me and, if I am not mistaken, Energywatch—if I am mistaken, I apologise—have not, in the absence of further information from my right hon. Friend, been convinced that the Bill is as explicit on those matters as we would wish it to be. Therefore, I offer this probing amendment. As I argued on Second Reading, in order to spot trends or weaknesses in the industries, the new NCC will need access to accurate, transparent data. However, as it will not be fielding most complaints, it will not be in a position to collate the data.

Clause 43 requires suppliers to deal effectively with complaints, and later clauses require information on such matters to be made publicly available. For example, clause 45 requires the new council to publish statistics on the compliance of suppliers, and clause 46 requires suppliers to communicate information tothe public. All of that is welcome. However, my contention, and the raison d’être of the amendment, is that there is nothing between those two to say that suppliers must keep track of the data needed to fulfil those requirements. If I am right, then when the NCC attempts to publish statistics on complaint handling, suppliers will be justified in saying that no records have been kept. Perhaps my right hon. Friend will clarify that later. I shall be glad to be told that I have got it wrong, in which case I will not press the amendment, but the point is worth putting. The amendment seeks to close the loophole, if it exists, and to ensure that reliable, transparent data will be provided to the NCC in order to facilitate evidence-based policy making by the new council. Some might ask why I seek to be so firm about suppliers. Let me be blunt. I do not believe that they have served the public well.

I am not alone in taking that view. A headline in this morning’s Daily Record reads:

“Power to the People. One million Scots could save £122 a year by ditching ScottishPower”.

Later on in the paper another supplier spends a full page telling us how inadequate Scottish Power is, particularly in providing information, the very point that my amendment seeks to address. In the leading article Ofgem’s Alistair Buchanan is quoted as saying:

“Competition is all about customer power.”

Well if it is, I welcome it, but I have not seen as much evidence of it as I would want to see. Alistair Buchanan continues:

“Any supplier that tries to buck the market by not lowering prices or failing on service risks an exodus of customers.”

My amendment seeks to ensure that suppliers act efficiently, competently, and keep information about who is complaining and what they are complaining  about. That is absolutely reasonable. In order to givea political balance, indicating how the Committee’s thinking is perhaps ahead of the world outside, some of us might have seen in the tube last night last night the headline in the Evening Standard:

“Power rip-off hits millions. Regulator tells energy firms to cut their prices.”

Fine. As I said last week, I want the regulators to exercise the powers that they have and to be tougher in so doing. I have not seen the suppliers exercise their responsibility to consumers in a way that we are entitled to expect. Again the figures are given in both newspapers for the profits that have been made and the £4 million golden handshake that was given to the chief executive of Scottish Power.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I fully understand the point that the right hon. Gentleman is making about customer handling. But does he also recognise that the message from both those newspapers is that competition does have a role to play and that the combination of good procedures, or good standards in complaint handling, and good competition is important? Does he recognise the role that competition can play?

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

I would not dispute that. But as we have tried to ensure that competition—Ofgem might have been sincere in what it was seeking to do—more weight seems to have been given to the input from the suppliers than to the views of consumers. In the absence of the information which the amendment seeks—my right hon. Friend the Minister might be able to assure me that it does exist in the Bill—consumers are not being given the service which they are entitled to expect from the regulator. Their views ought to be represented. In that spirit I invite my right hon. Friend and the Committee to consider amendment No. 73.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

I welcome you to another exciting day on this Bill, Mr. Weir. We are pleased that the Government have paid attention to the amendments tabled in another place requiring the regulator to prescribe standards for complaints handling. It should be noted that Ofgem and Postcomm were not very keen on this idea. But we certainly feel that it goes to the heart of the matter of whether companies themselves be able to have full control over all complaint handling. The right hon. Member for Coatbridge, Chryston and Bellshill mentioned earlier that although we have a requirement for competition, and competition will drive service, it is still not necessarily in the company’s interests to gold-plate service unless it will result in bottom-line profits. We support the amendment. The question is this: would redress schemes on their own be a big enough stick to force companies to raise their game?

The other question is do these companies have the physical ability to take on the extra volume of complaints when Energywatch and Postwatch are abolished? We saw stories in the press last week involving British Gas, which indicate that there are one or two problems that need to be addressed.

Amendment No. 60 is highly commendable, but amendment No. 61 seems to take back with one hand what the other hand has just given. It gives more leeway   than we would have wished to see. I take it from the Conservative Members that there is no desire to push this matter to a vote. However, we certainly wouldhave preferred if we could have voted separately onthe two amendments and we would have liked tosee amendment No. 61 not being implemented. Nevertheless, in the light of the conciliatory attitude from the Conservative Members, to push that amendment to a vote would be somewhat churlish.

We have supported amendment No.33, which the Conservatives tabled. I appreciate that the hon. Member for Hertford and Stortford is going to withdraw it, but we think that that amendment is the one that the Government should have made in the first place.

As far as amendment No. 34 is concerned, that is another proposed change from “may” to “shall”, which again we support. We think that amendment No. 30 is very important. It matters because Energywatch in particular keeps detailed records on complaints by categories and how complaints are broken down—the capture of that data in that way—is, we feel, very important indeed.

We certainly would support amendment No. 73, which was tabled by the right hon. Member for Coatbridge, Chryston and Bellshill. We feel very strongly that complaints data is useless until and unless it is broken down. So we would certainly support that amendment.

Photo of Ian McCartney Ian McCartney Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office

First, I again thank my right hon. Friend the Member for Coatbridge, Chryston and Bellshill for the passionate way in which he has pursued this issue. I hope to reassure him, not simply for the purposes of asking him to withdraw the amendment. What he has expressed, describing what has goneon and what continues to go on, shows a totally unacceptable situation. That is why in this Bill we have given such extensive powers regarding redress; that is why these amendments are set out in the way that they are. They incentivise the industry to clean up its act. If the industry does not do so, it will potentially face having to make, each day, compensation payments of significant amounts, along with the loss of reputation in a market place that is filled with alternative providers of the services that they seek to provide.

So it is important that, as we approach this subject in the way that we are, that we incentivise improvements; build on the good practice that exists, and, where good practice does not exist, create good practice and give the relevant powers to the regulator to do that.

The proposal improves the situation regarding both regulators and companies. We know, because both companies and regulators have been telling us during the consultation process and since, that great strides have been made in the sector to improve performance, and that improvement is set against a backdrop of difficult issues for the sector. For example, British Gas claims that the issues that it faces are due to migrating 14 million customers into a new billing system. As a consequence of that, we know that there have been substantial problems in the implementation of that system.

As the situation currently stands, there is little that customers can do but wring their hands. After this Bill becomes law, they can do more than wring their hands; they will have not only a complaints procedure, but, if  the matter is not resolved, they will have a procedure that will allow them compensation, including financial compensation, for the failure to respond effectively to their complaint.

My right hon. Friend asked me to ensure that there is an umbilical cord between the provider, the regulator and the NCC. I want to reassure him on that point. [Interruption.] I know that it is a three-way umbilical cord, but I think that I am entitled to some licence. Clause 20 requires the new council to enter into co-operation arrangements with designated bodies such as the OFT, which supports Consumer Direct. That is intended to allow information about complaint numbers and trends to be sent to and used by the NCC.

In each part of the process, whether involving a provider, a regulator or the NCC, information is important, not only for establishing trends, but to confirm whether there is compliance with the customer complaints processes and to identify the areas in which significant customer complaints are received for a particular company and what that company must do in conjunction with the regulator to resolve those issues. We also need to know the issues and trends that will require the NCC to improve complaint-handling processes and to improve and extend redress schemes. Information is a critical factor in ensuring that the system works effectively at all levels. My right hon. Friend is absolutely on the money on this issue, which is why I want to reassure him and why I took care in talking about his amendment to clause 43 and its relationship to schedule 5 and the relationship of those provisions to clause 20.

The purpose of the Bill is to put the building blocks together, which will show that ours is a comprehensive approach. As we move into the implementation phase, I assure the Committee that I will review all the points that are raised here. Whence they are raised is irrelevant; I aim to ensure that all the practical comments made here are reflected by the implementation of the proposals. Since the debate in the Lords, we have taken a great deal of time to consider the bringing forward of the amendments. I have acted in good faith. I thank the hon. Member for Hertford and Stortford for his kindness, although to extract a political point it was he who first took up the idea. We will not argue about that. The main thing is that there was a level playing field, in that everybody recognised the need for incentives. I hope that I have reassured my right hon. Friend the Member for Coatbridge, Chryston and Bellshill that there is a deliberate link between the different elements. I shall write to him during the development of the implementation strategy to discuss it with him in detail, so that he can be certain that what I am saying will happen in practice.

The hon. Member for Solihull made a criticism of the sunset clause—I think that that is the jargon that is used in the industry. I have a reputation for being in favour of red tape and bureaucracy, but that is not true. I never count employment rights and the minimum wage as red tape; they are reasonable, decent measures and I am pleased to say that I think that the party of the hon. Member for Hertford and Stortford now accepts that. Amendment No. 61 will merely facilitate market changes in the event of improved handling and complaints processes. There will be potential, after  public consultation by the Secretary of State and if the regulation is redundant, to secure changes under the provision. That is all that the amendment will do. It is not a back-door policy; it will not undermine the principle set out in amendment No. 60, but it is a process that has been widely used, and reasonably so, in the last few years.

Until the hon. Member for Solihull made her remarks, I thought that there was a common purpose in regulatory matters and that if improvements in the market place made it clear that a regulation would become redundant, that should be accepted after consultation and an evidence-based assessment. Amendment No. 61 does not give with one hand and take away with the other, as the hon. Lady so luridly put it. I hope that with those explanations, hon. Members will accept my amendments and that we can proceed with improving the Bill.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

My right hon. Friend is always remarkably convincing. Nevertheless, I hope he will agree that it was right for the Committee to take the opportunity of amendment No. 73 to give these issues an airing, even before we read the Daily Record and the Evening Standard.

I very much welcome my right hon. Friend’s description of how the Bill, if enacted, will be implemented, and I followed what he said about the umbilical cord. I also welcome what he said about information being a critical factor. It is at the heart of everything that we are trying to achieve and was the purpose of amendment No. 73.

In the spirit of generosity that is typical of the Committee, but consistent with the clear explanations given by my right hon. Friend and anticipating that the issue might emerge again when these matters are discussed on the Floor of the House, I will not press the amendment to a Division.

Amendment agreed to.

Amendment made: No. 61, in clause 43, page 26,line 14, at end insert—

‘(5A) If a date is prescribed in relation to a regulator for the purposes of this subsection, from that date subsection (1) has effect in relation to that regulator as if, in that subsection, for “must” there were substituted “may”.

(5B) In subsection (5A) “prescribed” means prescribed by order made by the Secretary of State under this section.

(5C) Before prescribing a date in relation to a regulator for the purposes of subsection (5A), the Secretary of State must consult—

(a) the regulator,

(b) the Council, and

(c) such other persons as the Secretary of State considers appropriate.’.—[Mr. McCartney.]

Clause 43, as amended, ordered to stand part of the Bill.