Clause 68 - Requirement for transparency

Consumer Rights Bill – in a Public Bill Committee at 3:30 pm on 6 March 2014.

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Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills) 3:30, 6 March 2014

I beg to move amendment 74, in clause 68, page 38, line 41, after ‘trader’, insert:

‘, which for these purposes includes a provider of financial services,’.

The clause deals with the requirement for transparency, so we have moved on from debating what is fair or unfair to what is known or unknown. Although we will debate amendments 74 and 75 separately, they should be seen as part of the same discussion. A particular concern has been raised with us regarding the providers of financial services. I want to say something briefly about amendment 74 before we move on to a more substantive debate on amendment 75, so I hope that, if things are not entirely clear, colleagues will bear with me until we get to debate that amendment.

Through amendment 74, we are seeking reassurance from the Government that providers of financial services, and especially insurance companies, are explicitly covered by the transparency requirements. We want to ensure that the clause’s transparency requirements include the work of the legal interests of insurance companies. Before we move on to debate the next amendment on the substantive issue of the concern about insurance companies and their legal divisions, will the Minister confirm that she sees insurance companies and their brokers and all traders acting on their behalf as covered by the transparency requirement, so that courts and other enforcers can be clear that that is the spirit and intention of the law? That may seem to be implicit in the clause, so if she can give us an explicit commitment that financial services and insurers are covered—she will recall our concern that some provisions allow various sectors exclusions from legislation—we can move on to the next amendment.

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I can indeed give that assurance. When we refer to traders in this part, that includes all traders dealing with consumers, including those in the financial services sector. I could explain why I do not think it would be helpful to make the amendment, but as it is a probing amendment I hope the hon. Lady is satisfied with that clarification.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I thank the Minister for her answer. I am happy that we can be confident that insurance services will be covered by the requirements. As a result, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I beg to move amendment 75, in clause 68, page 39, line 2, at end add—

‘(3) Whether that notice is a general statement of the consumer’s legal rights or specifically with regard to the obtaining of legal advice or assistance by an injured consumer it shall be drafted by and shall only recommend or direct an injured consumer to bodies that are wholly independent of the trader or anyone connected to the trader.’.

The hon. Member for Plymouth, Sutton and Devonport has been sat there waiting avidly to understand what we are concerned about—all will be revealed. The amendment goes to the heart of our concern about evidence of  growing consumer detriment in the provision of insurance services and the role of legal protection. Members may have insurance policies that offer them legal protection and they may be familiar with those.

The cost of legal action—particularly the fees—can be prohibitive and none of us wants to take such action, although I know that some of us have benefited from that as a trade in past lives. If one had struggled financially to claim compensation following an accident or unfair dismissal at work, or even a dispute with a tradesman, one such remedy—the Minister has referred to this in the course of our discussions—would be through the courts under common law. However, that can be expensive and that is why legal protection insurance can be a useful add-on.

Such insurance is usually sold as an add-on to a home or car insurance policy for a small extra premium that many people are prepared to pay, but sometimes it is free. It tends to have a limit on how much may be claimed. The amendment seeks to probe how that process happens. There is growing concern that there may be a conflict of interest at the heart of how insurance services and legal advice within those services are sold and managed. I know that some hon. Members in the Committee, having worked in the field, have direct experience of some of those issues, and that others wish to speak about it, so I do not intend to set out in detail where the amendment is coming from. Suffice it to say that there is a simple question: if someone claims against their legal insurance, for whom does the legal service contract? It is in the interests of the insurance company that legal fees are as low as possible, as it is covering those fees. Does it mean that it will act to get the consumer the best deal, or simply the cheapest deal? Those two might not always be the same.

The amendment would give consumers who take out legal protection through their insurance policies greater certainty that any lawyer contracted through such a deal would act independently of the interests of the insurance company. The lawyer would therefore act in the consumer’s interests in any of their dealings, rather than purely in the insurance company’s interests.

The issue is of particular concern because of some of the work done by the Competition Commission, which found that the industry was not working well for consumers. A series of conflicts of interest were creating incentives to increase the price of premiums, at the expense of quality of cover. A chain of interactions between the insurance company and the lawyer meant that it was beneficial to insurance and legal services companies to ratchet up the fees and expect the consumer to pay for them, rather than to ensure that the consumer—who, if they were claiming, had obviously had some terrible experience such as an accident or being sued—got the best deal.

The Competition Commission has suggested that the extra premium costs as a result of those problems are between £150 million and £200 million a year. The issue is not just the cost to the consumer, but concern that the work—be it the representation or any replacements made—may not come as standard. Let me make it clear that this issue is separate from the question of whether a consumer might claim on their insurance, for example, for the cost of repairing a car if they have had an  accident. We are talking about legal representation if, for example, someone was being sued for causing the accident.

I hope that that is relatively straightforward. Given that there are members of the Committee who have much greater expertise on the issue than I do, I shall stop there and look to them to explain—probably better than I can—what the concern is.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

Before I start my remarks, given the nature of the amendment, I would like to refer the Committee to my declaration in the Register of Members’ Financial Interests. I was a practising solicitor at Thompsons Solicitors, for a modest return, until I took up my position here, for an even more modest return.

I would also like to refer to you, Mr Amess, as you probably have the best memory of such events of everyone present. Looking at the issue, we will discover that we are talking about a closed shop. You will recall, Mr Amess, that under the Employment Act 1990, closed shops were made illegal, and that they were further curtailed under the Trade Union and Labour Relations (Consolidation) Act 1992. My hon. Friend the Member for Walthamstow has tabled an amendment that reveals that the closed shop is alive and well, operating in this particular area of consumer practice.

Before I continue, I should take the opportunity to set the record straight about Ryanair. I am not convinced that it was £70 a head; it may have been £1 or £2 less. I want to put that on the record, because I do not want to fall out with Michael O'Leary. It might have been £50; I am sure that he will agree with me.

The current practice in before-the-event legal expenses insurance is to direct customers who might need that to a limited number of providers. That means that there is a real risk of over-emphasis on the financial returns gained from the relationship between the trader and the body that the consumer is directed to. In short, the solicitor who contracts to do the work in the hope of volumes of work will negotiate the terms and conditions with the trader, including the hourly rate at which they are paid. It is very much a race to the bottom, and that impacts on the quality of advice and representation that consumers receive. There is a grave risk of cherry-picking and of gross under-settlement, which is a massive consumer detriment.

When the cases that are picked up in these circumstances progress, the consumer can engage a lawyer of their choosing if legal proceedings are necessary, but often the damage is done by the time that stage is reached. I have seen many an example of poor practice and of providers of services limiting their advice to telephone communication. They never sit down and take full instructions from an injured party. I have picked up a number of cases over several years of very poor practice and under-settlement.

So we are unearthing what can only be described as a cartel that is there for the betterment of the body to which the consumer is referred and very much to the detriment of the consumer. If the body to which the cases were referred could demonstrate its expertise and competence, it would be competing in an open and free  market, but that simply is not the case. I would not say that people are being suckered into these contracts, but they are simply not aware that they exist. They simply do not need the cover in any event. Some people are paying additional premiums for legal expenses insurance that they may have rolled up in other products such as their household and contents cover. There is a debate about how that should be extracted and identified as a separate financial transaction, but people already have legal expenses cover with their household and contents insurance or credit card cover and yet they are persuaded to part with an additional fee for such a service. It is available to them in all manner of ways.

This practice is not confined to road traffic accidents and personal injury cases, but sadly that is where it is found most frequently. A particular case has been brought to my attention. I believe that it was eventually conducted by my former employers, Thompsons. A couple aged 81 and 79 were injured when a car overtaking from the opposite direction hit their car head on. One of them was airlifted to hospital with a severe whiplash injury. The next day, while she was in hospital, and with no discussion with her, the legal expenses insurers started a claim. This is common practice, Mr Amess. You may be surprised to hear that, but legal expenses insurers who get wind of this information very rapidly start a claim for personal injury without the consent or involvement of the person who was injured. They do so on a speculative basis, because number crunchers will tell them that those people who would object are few in number, and the process is under way and they gain a financial advantage. Because of what is called the pre-action personal injury protocol, the sooner someone gets on with putting in a letter of claim and progressing it, the sooner they can get to settlement. Time is money, and that is why it is done, but often claims are made without the party concerned knowing anything about it.

In this particular case, the legal expenses insurers got on with the business of appointing so-called medical experts, who went about an assessment they did not really think was in any way appropriate. They estimated damages at between £1,800 and £2,000. It was clearly a much more significant injury—it was quite incapacitating —and when the case was ultimately rescued and put into the hands of somebody who could do a proper job, it turned out that the true value of the damages was some £8,000. There would have been a potential £6,000 loss, or shortfall.

The client said:

“We didn’t ask for a legal expenses insurer and we can only assume they got our details from our car insurance company. We were in shock after the accident, yet we were harassed with phone calls from them pushing us to make a claim and then when we agreed the way we were dealt with was so impersonal we felt we were just like a statistic. Their letters were in legal mumbo-jumbo and we struggled to make sense of them.”

The client eventually realised that they already had that cover available, because the gentleman concerned was a retired Unite member and had access to legal services through that route, which cost him absolutely nothing. As a result, he was able to recover proper damages, and he concluded by saying:

“What happened to us is a real warning to others. Don’t allow yourself to be pushed into having your insurers appoint people to act for you and get a second opinion if you are in any doubt.”

That message must go out very loudly from this Committee.

I am sad to say that that practice is not restricted to what we would describe as the commercial insurance market. I am afraid that members of our armed forces are also unwittingly drawn into these arrangements. Since the repeal of section 10 of the Crown Proceedings Act 1947 in May 1987, members of the armed forces have had the ability to pursue claims of negligence against the Ministry of Defence. That principle is being somewhat eroded by some commentators at the moment, who would like to see that position changed; I certainly would not.

What has happened since 1987 is that products have been developed for the benefit of members of the armed forces, whereby they can recover personal accident insurance, as someone would with a holiday scheme, or otherwise; in such a scheme, if a terrible accident should befall someone, there would be a tariff-based system. There is also the ability through legal expenses insurance to cover actions to claim damages for negligence by an employer or another party. That is as it should be.

Sadly, the MOD chose to approve one single product, which is predominant in the market, namely that of PAX Insurance. Under that policy, the MOD restricts the legal advisers that are available to one single firm. What happens ultimately is that there are other providers in the marketplace, who are able to represent injured people extremely well. However, it is difficult to get past that initial filtering process, because members of the armed forces are a captive audience, with their referral to the same policy for the benefit of an accident payment system—a tariff-based system—and when they seek full and comprehensive legal advice they are only with one firm.

That has been the case since 1989, so I am making the criticism and observation of Governments of all colours that they have not properly looked at this issue. Here we are today, debating an amendment that seeks to make it clear in a commercial enterprise—a commercial contract—that that anomaly should be put right. It should be revealed who has been involved in these practices and yet our own Government is party to something very much along the same lines.

I very much welcome and support the amendment. It shines a light on a very concerning area and one of great restrictive practice that, in the context of the Bill, we could seize this opportunity to correct.

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills 3:45, 6 March 2014

The hon. Gentleman obviously knows a huge amount about the issue and he clearly feels very passionately about it. It is helpful and we are lucky in the Committee to have so many Members with valuable expertise. The hon. Member for Wycombe has been very helpful on some of the technological issues, and the hon. Member for Middlesbrough clearly has a lot of experience in these areas. We are lucky to have such a broad range of experience among Committee members.

I have sympathy with a lot of points that the hon. Gentleman made. There are certainly cases in which people are not given the advice and support that they need. In the circumstances that he highlighted, at times when people are having possibly the worst time of their life, after horrific car crashes and all sorts of things, they probably need to know that they can rely on people and that people have their best interests at heart, even more than normally, so I have a lot of sympathy with the points that he made.

As I am sure the hon. Gentleman knows, the contract covering the legal services element that he and the hon. Member for Walthamstow highlighted is normally part of the insurance contract and as such, it is covered by Financial Conduct Authority rules. The FCA is the regulator responsible for ensuring that companies comply with the rules, principles and so on.

The FCA principles that would cover their conduct are principles 6 and 7, both of which I mentioned in a previous debate. Principle 6 is:

“A firm must pay due regard to the interests of its customers and treat them fairly.”

That is a broad principle. It gives the FCA quite a lot of leeway to decide what it thinks treating a customer fairly looks like. It is purposefully broad so that the FCA can take account of individual circumstances when it wants to look at whether it can take a case forward.

Principle 7, which is the second principle that would apply, is:

“A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.”

That also links to some of the points that the hon. Member for Middlesbrough raised about the way in which such firms are communicating with consumers.

There are various requirements by the FCA of insurance companies, which include such things as:

“Firms should give clear and accurate advice about insurance products so that customers understand what a policy does and any limitations it may have.”

In the area that the hon. Gentleman raised, that second part is particularly valid, about the limitations that there may be in the requirements for the consumer in relation to the terms of the contract that they are signing up to.

The FCA has also produced an “Insurance Conduct of Business Sourcebook”, in order to set the standards that are required for insurance companies, and that is what covers these relationships. The rules include that consumers are given all appropriate information. The hon. Gentleman has highlighted issues such as the fact that consumers are not being given the information that they need about the terms of the services that are available to them, and that when something happens, they are not being given the information that they need in order to make informed decisions about who to get to act on their behalf.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

I am grateful to the Minister for outlining FCA principle 6, but is not the heart of fairness the fact that the consumer can be confident that their affairs will be conducted properly, professionally and competently? Sadly, what is at the heart of these agreements, more often than not, is not the interests and rights of the consumer but the financial interests of the trader who sells the product in the first instance and the organisation that delivers the service that the consumer has purchased. That is what governs this product, not the best interests of the consumer, and that is where the lacuna lies in my view.

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills 4:00, 6 March 2014

Clearly, a lot of these cases involve extremely complicated relationships between the different parts of the contract. The hon. Gentleman is right to highlight some of the potential conflicts of interest and  so on that arise from that complexity. That is why it is important that the FCA can apply the general principle that customers must be treated fairly. That should pick up the points that he makes about ensuring that such traders act in the best interests of consumers, and he has mentioned a number of cases in which it is questionable whether that was so.

As the FCA is the regulator, it can refer such cases to the Financial Ombudsman Service. We heard evidence at the beginning from Martin Lewis about the fact that the Financial Ombudsman Service is extremely effective at obtaining redress for consumers. Its decisions are binding up to £150,000, so it has quite significant power to ensure that consumers are given redress when something goes wrong.

The issues raised by Opposition Members today relate to complex contractual relationships, and they are more properly matters for the Treasury. I therefore propose to pass them on to Treasury Ministers and ask them to look at them and then get back to the hon. Gentleman with some more detail about what is being done and how this can be tackled, because it is an area for regulation by those Ministers. I hope that that answers Opposition Members’ questions.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I thank the Minister for her recognition that there is an issue. This is another example of a fairly simple consumer concern—whether, as we said in the double-charging debate, someone should act on behalf of two parties—in that the needs of the purchaser of legal insurance might not be the same as those of the insurer. There is a simple point about whether it is fair for people not to know that that conflict of interest might arise.

I am fully prepared to believe that, as the Minister says, the FCA can take on this issue, but as she says that she will write to the Treasury, I wonder whether she will also write to the FCA and ask whether it plans to look at the potential conflict of interest in the industry and consider what it might be doing to people’s insurance premiums and to the quality of the legal cover and payments that they receive.

My hon. Friend the Member for Middlesbrough has shown today just how serious this issue is and how it is growing. The fact that the Competition Commission investigated it suggests that the problem is recognised. If we do not ensure that the Bill protects consumers from the potential conflict of interest in legal provision in insurance services, how else will that happen?

I appreciate that the Minister says that she will write to the Treasury, but given that she said that the FCA rules should cover this, it would be helpful for the Committee to know whether this is a live issue for the FCA and whether it is considering any change. If she gave that assurance, I should be happy to withdraw the amendment.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

We have put on record our concerns about these issues and this industry, and we will wait to hear from the Government what response they get from  the FCA before considering whether the Bill might become a better vehicle to deal with them by default because the FAC is not looking at them. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I beg to move amendment 110, in clause 68, page 39, line 2, at end add—

‘(3) For the purposes of transparency, the Secretary of State shall report to Parliament within three months of Royal Assent of this Act on how the Government intends to ensure that all traders offering services on behalf of any government department or local or public authority shall ensure the consumer is able to access information regarding any consumer contract or consumer notices which may reasonably be understood to apply to them.

(4) This information shall be provided to the consumer—

(a) in a form which enables the consumer to assess whether the price being paid for the service is reasonable; and

(b) in such form as allows any government, local or public authority to use this information to secure social and consumer benefits insofar as this complies with existing data protection law.

(5) The Secretary of State’s report shall include information on consumers’ rights to access this data and how they may exercise their rights under this Act subject to data protection legislation.’.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss amendment 98, in clause 68, page 39, line 2, at end add—

‘(6) For the purposes of transparency, the Secretary of State’s report to Parliament within three months of Royal Assent of this Act under subsection (3) shall include how the government intends to ensure that salient, non-commercially sensitive information is published on all contracts offering services on behalf of any Government department or local or public authority.’.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I hope that these amendments will find favour with the hon. Member for Wycombe, given his earlier comments, because they are about how such rights will apply to the public sector. In particular, they deal with some of the issues that the Minister has raised, such as unfair contract terms and transparency. Amendment 110 is designed to ensure that consumers can obtain any information that they require to assess whether the price that they are paying for public services is fair. Amendment 98 deals with non-personal data. Hon. Members will remember from previous discussions the difference between data on an individual’s direct relationship with a public service, and information contained in a data set to which they may have contributed. We need to make sure that both sets of information are available so that consumers can exercise their rights under the Bill to assess whether they are paying a fair price for a service.

It is not contentious to say that transparency is a good thing, so we should try to make services and decisions as transparent as possible. That goes back to the E word—empowerment—because people will be able to make better decisions if they can obtain information. For that reason, the CBI and Which? support the amendments. Those organisations, which represent consumers and traders who interact within the public realm, recognise the benefits of providing such information.

Fears about providing information—I wonder whether the Minister’s comments reflect such fears—are not well founded. In fact, there is a recognition that the more information we can provide, the better decision making  can be. The CBI is concerned that consumers’ ability to obtain information and assess whether a service is provided as they want it to be—and, therefore, whether the price is fair—affects the kinds of services that are commissioned, to which their members may contribute. The debate over the use of private providers is for another time, but the CBI’s point about consumers’ concerns is paramount. How can a consumer know whether a good service is being provided if they do not know the context, such as what the costs are, what the alternatives are and whether their public money is being used to obtain best value? I speak as an avid former member of the Public Accounts Committee and a huge fan of its work on value for public money. The amendment looks at the matter from the opposite perspective. It is right to have a national body that represents the interests of taxpayers, but having the necessary information immediately to hand would help us to make the decisions that we all have to deal with in our daily lives.

A future new clause deals with the role of advocacy, which is absolutely about ensuring that consumers have the appropriate information to enable them to exercise the rights that the Bill gives them. If the Committee were to support the amendments and new clause, I passionately believe that two thirds of our casework would disappear—that alone may be an incentive to Members from all parts of the House to support our proposals—because there is often a presumption that people have access to the information they need to exercise their rights when they do not, so MPs, citizens advice bureaux and consumer organisations become the back-stop. That is not good for business, for consumers or for the public sector, and the amendments are designed to address that situation. Access to the necessary information would inform the quality of the service that consumers receive and help to ensure that it is fit for purpose. It would also help to ensure that any remedies to which a consumer may have recourse are informed by accurate information.

I am sure that we have all encountered in our surgeries people who ask what my former council leader used to call the “pink elephant question”—people who demand that pink elephants be provided along Walthamstow high street in the belief that that is possible and that we are simply a roadblock to the pink elephants that the community needs. It is in consumers’ interests to provide better information about how much everything costs so that they understand what options are actually available. One would not go into Tesco and demand a pink elephant—although perhaps Members have done that; wonders will never cease—and if one did one would be informed that they were not on offer. But in the public sector, the opaqueness of information can sometimes lead to unreasonable demands and bad decision making. By providing information in the way set out in the amendments, and as a matter of course, we can empower not only consumers but those who work with them to ensure that we get both best value for money and best service.

The disagreement on this matter may arise because the Opposition believe that the flow of information is at the heart of progressive public services. Information such as that referred to in the amendments can empower all consumers, yet at the moment it is all too often known by only a minority of consumers. For example, somebody with a child with special educational needs  may have a statement and therefore a direct contract with their local authority. Any Member who has had someone in that position come to their constituency surgery will know that some local residents are better than others at securing the outcomes that they want, because some of them will be better informed about their choices. I have dealt with cases in which the cost of educating a child with special educational needs outside the borough has come into play, with questions about whether the provision is fair. Those parents who are better informed are often better able to challenge—after all, under a statement they have rights about the kind of service that they get—than those who are less well informed.

It would be incredibly progressive to address the lack of information and transparency about decision making within the public sector—about the contracts that are offered and the deals that are done by public services. It would open up an area of information, of redress and of empowerment that all too often is confined to those with sharp elbows. We believe that that would improve not only costing but outcomes within the public sector. That is why we have tabled the amendments. They feed into the discussion we had on Tuesday on a progressive approach to the consumer and to the public sector that we want to see the Bill support. We hope we can encourage the Government to go further and support that. [Interruption.] I can see that the hon. Member for Wycombe is looking attentive as a result of that idea. I agree with him that there are many aspects of information provision in the private sector that help drive quality and improve efficiency. We want to see that in the public sector as well.

That is the spirit behind both the amendments. I hope that the Minister will engage positively with the need to make sure that not just those with sharp elbows or the ability to mine data through freedom of information requests but everybody has access to the information they need to make good choices, and can understand when the choice they might wish to make—the pink elephant—is not available, and why that might be the case. Two thirds of my casework is not pink elephants, but a lot of it is information gaps. That is what we are seeking to redress with the amendments. Accordingly, I look forward to a positive and constructive response from the Minister.

Photo of Steven Baker Steven Baker Conservative, Wycombe

The hon. Lady said, tantalisingly, that the amendments might reduce our casework by two thirds. I am sure she did not mean to suggest that that would be a good thing because it would increase the time we could spend in the Tea Room. I feel sure that, like me, she believes that a reduction in our casework is a good thing because it would represent a reduction in human suffering in our constituencies. I am sure all hon. Members would agree.

I want to pick up the point about the extent to which public services can embrace the same sort of principles as business, and, in particular, whether revealing more information would help to deal with the structural problems in the public sector. I do not think it would, and for that reason I do not believe that the amendments are misconceived. Perhaps it will help the Committee if I mention the title of a campaign by the Bucks Free Press on our hospital: it is called Hand Back Our Hospital. The title is apposite, because before our hospitals were nationalised to produce the NHS, Wycombe hospital  was a locally owned mutual. In many ways it was not the hospital that it is now, but it served the public need. The public ended up with an accident and emergency unit, for example, but that has subsequently been taken away from them.

The essence of choice in the public services as opposed to the private sector is voice versus exit. On the left, people believe that to have a democracy it is enough to be shouty and to have elections for representatives to sit in these rooms and produce the services that people want. With exit, as the Minister referred to earlier, people can vote with their feet, and take themselves and their money out of unsatisfactory arrangements and go elsewhere.

I know from my speeches and testing of this concept in Wycombe that the public are generally warm to the idea of Wycombe hospital being a locally owned mutual. That would perhaps provide A and E services under a new model that the NHS is currently incapable of delivering. All of that is for another day. The point is that I am sure that the public in Wycombe would be happy to exit the present arrangements, to stop being taxed in order to pay people large sums of money by general standards to take away their services. At the moment, there is no way to exit from those unsatisfactory arrangements provided in the public sector.

We need a better way, which is more mutual, more co-operative, more in line with the wishes of those people who pay. It will not solve the problems of the NHS to give people more information. I particularly mention the NHS because it is very close to my heart and a top priority for my constituents. When we talk abstractly about the public sector and public services, perhaps that makes sense if we are talking about people spending their individual care budget, which is a very important subject. However, when we look at where most of the money is being spent in the public services, we see that the health service is at No. 2 and education is at No. 3. Unless a measure like this is relevant in health and education, I would suggest that it does not go far enough.

Both health and education need to be brought to a point where the choices that people make are not merely informed in the way that the amendments suggest but actually offer meaningful exit. For example, my constituents could say no, they will not pay the chief executive of a hospital trust more than £200,000 a year—I would have to check—in order to take away our services. That is not good enough.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills) 4:15, 6 March 2014

At the risk of upsetting the hon. Gentleman, I suggest that he reads Albert Hirschman, who talks about the value of voice and exit together as positive behaviour mechanisms. Let me give him an example of how that would work in the amendment: 10% of our entire NHS spending is on our failure to tackle diabetes. We wait until people get so ill that they have to go into hospital to have their feet cut off or have renal failure.

Does the hon. Gentleman agree that if diabetes patients had access to that information and understood the cost of waiting they would want to see more community-led  services to help keep them well? That would be in their interests and better value for money. Information can lead to behaviour change individually and collectively, and that is what we think this proposal would unleash.

Photo of Steven Baker Steven Baker Conservative, Wycombe

I am grateful to the hon. Lady for further extending my reading list of left-wing authors. If she looks back at my record she will see that I am supportive of the co-operative movement—and intend to be more so—for the practical reason that it combines both voice and exit. Provided that co-operatives are on a small enough scale, it is possible to get away from one and join another. I see great potential in co-operatives and mutuals for combining both things. I do not want to be too ideological. There is a very practical problem. My constituents cannot refuse to pay for services that are unsatisfactory. Merely giving them more information will not solve that problem, so I will not support the amendment.

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills

This is an interesting debate. We had a precursor of it when we heard evidence at the beginning of Opposition Members’ desire to bring public services into the remit of the Bill. First, I think we can probably all agree that transparency is at the heart of the consumer reform package; it is at the heart of the Bill. It is important to have consumers interact with businesses and residents interact with public services.

However, this is the Consumer Rights Bill and, as we discussed at the beginning, it is about contractual relationships between consumers and traders. I completely agree with hon. Members that it is important to have responsive and open public services, so that people know what they are getting and what they are contributing to. We can all agree on that. The hon. Member for Wycombe highlighted why it is important.

When the Committee took evidence on the first day of consideration, no consumer group wanted the Bill to deal with public services as well. Citizens Advice, Which?, the Office of Fair Trading and the Trading Standards Institute all thought it should not. [Interruption.] The hon. Member for Walthamstow is shaking her head. I have the quotes here if necessary. The general consensus was that the Bill was chunky and important—it is about consumer rights—but how public services can be responsive to individual needs is a different issue.

All public sector organisations, as the hon. Lady highlighted, are subject to freedom of information requests, so there is a mechanism for accessing the information, rather than requiring the Secretary of State to report three months after the Bill is enacted. Many of the services that hon. Members have highlighted today would not be covered by the Bill, as they are not services provided under contract, but under a statutory duty. A small proportion of areas of public services are provided under contract, and such areas would be covered by the Consumers Rights Bill. However, where public services are provided under a statutory duty, they do not fall under the remit of this legislation. I therefore do not think it would be appropriate to accept amendment 110, which would extend the Bill into areas that it is not designed to cover.

On amendment 98, which is about public contracts and transparency, I want to reassure the Committee that the Government are more transparent about their commercial activities than any previous Administration.  We are committed to ensuring the transparency of contracts that the Government procure. We already have a robust policy that requires all central Departments to publish tenders and contracts above a threshold of £10,000 on the Contracts Finder website. We have published more than 6,300 tender documents and more than 19,000 contracts, so there is a lot of information out there that people can access.

We have just endorsed the adoption of the open contracting principles in the UK open government national action plan, which sets out measures to deliver greater transparency of contractual data. We have already committed to go further by expanding the requirement to publish to the wider public sector, and that will be implemented through legislation.

I remind the Committee that the consumer contract regulations that will come into force later this year require traders within scope to give comprehensive information to the consumer before they enter a contract, so there is transparency of contracts at that level. It does not matter whether the trader is acting on their own behalf or on behalf of a Government or public body; they would all be covered by the consumer contract regulations.

I would support the principle of amendment 98, but the Consumer Rights Bill is not the appropriate mechanism for it, so I hope the hon. Lady will withdraw her amendment.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I feel as though I am turning to supervision this afternoon, but I want to add to the reading list for the hon. Member for Wycombe. I am sure the hon. Member for Spelthorne has already read TH Marshall and the idea of citizenship and the contract that one might have with the state. Many British citizens will be startled to hear the Minister suggest that we do not have a contract with the state—that this is merely about services provided to us and that we like it or we lump it. Even if we are not having a philosophical debate about our relationship with the state, as taxpayers who pay for something, she is not doing justice to the scope of the legislation she has brought before us.

Let us remind ourselves of clause 2(7), which defines businesses that will be covered by this legislation as including

“the activities of any government department or local or public authority.”

The legislation clearly does apply. The Minister wants to quote the evidence that was given to the Committee, but what those organisations said—and, indeed, have subsequently said—was that because the scope of the Bill at that point was not explicitly about the public sector, they had not considered it. They did not say that they did not think it should apply. They have been very positive about the idea subsequently, not least because the legislation is already drafted to cover such instances.

Can the Minister tell us where the specific examples are? Is it, for example, personal care budgets? After all, the Bill covers implied contracts. Anybody who actually has a personal care budget will know that there is a schedule. Is it a statement of special educational needs? Is it a rental agreement with a housing landlord? After all, with the social housing landlord, someone will have a series of rights that they are expected to adhere to. Do they not have rights in terms of their being fit for purpose? [Interruption.] My hon. Friend the Member for Cardiff South and Penarth mentions dental treatment.  There are also student tuition fees. After all, the Office of Fair Trading has just said that some universities might be breaching students’ consumer rights in the way in how they apply sanctions to students who, for example, have not paid their library frees, thereby denying them their university education.

Consumer rights are being applied in myriad areas of the public sector where the Bill will no doubt come into play. The Minister suggests that only one or two very small areas will be affected and that the Bill is not about services provided under a statutory duty. In her evidence three or four weeks ago, she offered us a letter on where she saw the Bill affecting the public sector, but that letter has yet to materialise. If she has sent the letter, I am afraid that it has been lost in the post. That is interesting —do we have an implied contract with the postal service if we pay for a stamp? She might want to use her fit-for-purpose test. [Interruption.] Indeed, the postal service has been privatised, which makes the question simpler.

The Bill covers consumer notices and implied contracts. The Bill makes it clear:

“‘Business’ includes the activities of any government department or local or public authority.”

Consumer rights will come into play within the public sector. Opposition Members believe passionately that it is right that we consider the rights that people have within the public sector, because there is such inequality in exercising those rights—it is about sharp elbows. That is where amendments 110 and 98, and the new clauses that we have tabled, come from.

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I wish to make it clear that I wrote to the Committee on 12 February. I have the letter here, and I am happy to send the hon. Lady another copy. I sent the letter when I said I would.

I have made it clear that the public services that come under the Bill are the ones provided by contract. Public services provided under a statutory duty do not fall within the Bill’s remit. As the hon. Lady highlighted, and as I said, there are some public services that are provided by contract, which will fall within the Bill’s remit, but the majority of public services are provided under a statutory duty, as I am sure all hon. Member are aware, and those duties do not fall within the Bill’s remit.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I thank the Minister, but I can honestly tell her that we have looked for the letter because we are concerned about the matter. Will she clarify, for example, the situation in the case of personal care budgets? People have a contract with their local public authority, so is that covered by the Bill? Is a statement of educational needs covered? Are child care vouchers, or anything that might be purchased with child care vouchers, covered? Is an ASBO or its successor covered? After all, an ASBO is a direct contract between the consumer and the trader, and it is “business” as defined by the Bill.

There are multiple examples of where people increasingly have a direct contractual relationship with the public sector and where we think the Bill could be applied. It is therefore right that, as the Bill passes through the House, we understand how consumers will exercise their rights under the Bill in relation to the public sector.

Photo of Steven Baker Steven Baker Conservative, Wycombe

The hon. Lady seeks to lecture Government Members on citizens’ rights. I remind her that, in 1991, the Major Government introduced the citizens charter, which sought to make the Administration accountable  and citizen-friendly by ensuring transparency and the right information. Lecturing Government Members is a bit too much. The Conservatives have always stood on the side of rights for the public and for citizens in relation to the public sector.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

May I take it that the hon. Gentleman is deeply unhappy with the Minister’s suggestion that we do not have a rights-based culture? She says that it is actually about statutory duties, which are separate from consumer rights. The hon. Gentleman and I might not agree that the cones hotline was the embodiment of public rights that we intend to achieve, but from what he says I would wager that he agrees that, where consumers have rights, they should be able to access the information that enables them to exercise those rights. Within the public sector, if one is to judge whether a service is satisfactory or fit for purpose, one should be able to access that information. That is the intention of our amendment, and it was the intention of our amendment on the midata project.

I remind the Committee that amendment 110 does not commit to a specific format; it simply says that we need to understand how people will access information so that they can exercise their rights. It is a proportionate amendment, and for the Minister to dismiss out of hand the idea that such information and such rights should apply across the public sector in the way we believe they will as a result of the Bill—we support opening up public services to the challenge, scrutiny and positive constructive empowerment that comes from such rights—is a disappointment. I am sure that people will have a direct contract not only in relation to personal care budgets as they are expanded, but in relation to things such as child care vouchers, tuition fees and rental agreements.

I am happy to withdraw the amendment, because we will continue to have this debate, and I reserve the right to raise the issue with the whole House on Third Reading, because it seems to me that there will be Government Members who will be deeply unhappy if we do not have this conversation.

Will the Minister just clarify something? Does she see the Bill coming into play in the examples that I have given? If she does, when we come to debate some of the other amendments, at the very least Members from all parties can be prepared to have the conversation. For example, what are a student’s rights if they have their degree removed from them because they have not paid their library fee, or if they feel that the quality of the tuition that they have directly paid for is not fit for purpose? What are their rights under this legislation?

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills 4:30, 6 March 2014

The Bill covers contracts between a consumer and a trader, and the word “contract” has a specific legal definition. If that definition is met, consumers are covered by the Bill; if it is not met, they are not covered by it. A contract is an agreement—expressed either orally or in writing—with specific terms, between two or more persons or entities, in which there is a promise to do something in return for a valuable benefit known as consideration.

It is not just about the use of the word “contract”; there is a legal definition that applies to the word that defines whether something falls within the remit of the Bill. For example, with an ASBO there is no payment or consideration, so it is not a contract that meets the definition of “contract” in relation to the Bill. However, with things such as personal health budgets, if a commissioning group, rather than purchasing a service on behalf of a consumer, provides the means to the consumer so that they can make their own choice, at that point the agreement will be between the consumer and the provider of that service. Therefore, that is a contract for services that will be covered under the Bill.

As I said, there are areas of public services that are delivered by contract, but the contract has to meet the proper legal definition for those services to be covered by the Bill. Other public services are clearly not covered by it.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I thank the Minister for her answer. Can she confirm that tuition fees and services bought with child care vouchers are covered by the Bill? Can she confirm that a tenancy is a contract between a local resident and their local authority, and as such is a contract under this Bill?

Photo of Jennifer Willott Jennifer Willott The Parliamentary Under-Secretary of State for Women and Equalities, Assistant Whip (HM Treasury), The Parliamentary Under-Secretary of State for Business, Innovation and Skills

No, a tenancy agreement is covered by separate legislation. In the case of child care vouchers, if the individual consumer has the money and then uses those resources to purchase a place from a child care provider, then there is a contract and there is consideration included in it, so that would be covered.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I hate to press the point, but if the Minister could clarify whether tuition fees are covered by the Bill, I think the Committee would have enough examples to begin to deal with the issues that we might want to cover. I believe that there will be different legal interpretations about some contracts, but will she clarify whether tuition fees are covered? [ Interruption. ] I think that her officials are saying that they are, but I would welcome her guaranteeing that that is the information that they are trying to give her, because for many of our constituents that would be a particularly appropriate example to explore how consumer rights come into play.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

As a former youth worker, I happen to see young people as people too, and therefore as consumers, and capable of purchasing their own education, unless the Minister is suggesting that if their parents have paid their tuition fees it is different. Perhaps what comes into play is whether they have taken out the tuition loan themselves. Either way, I think the confusion about these issues reflects the points that these amendments were designed to tease out, and I am sure that Government Members will want to reflect on that as we move on and consider parts of the Bill to which we have tabled amendments about the public sector and what rights people might have. I believe that the point that we are seeking to make with these amendments is—at the risk of sounding overly grand—well made.

We will not press the amendments, but I am sure that we will return to the issue at a later date, unless the Minister wants to clarify whether she means that students would not be considered as consumers if their parents had paid the tuition fees, but would if they had taken out their loans themselves.

Photo of Rehman Chishti Rehman Chishti Conservative, Gillingham and Rainham

On the question of whether the consumer is the parent or the student, it is the student who gets the qualification at the end of their consumer. The parents do not get the qualification, so the consumer would necessarily be the student who goes to university.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I thank the hon. Gentleman for that helpful and, I presume, legally based intervention. He confirms what we suspected, which is that students have consumer rights under the legislation, because tuition fees, as the Minister has clarified, are eligible for consumer rights legislation if students are the consumers. The point is made, and we look forward to further debates. I hope that by then Government Members will have reflected on our concern that if the rights are not clear within the public sector and consumers are not able to access information to exercise their rights, detriment will occur. That is what we need to tease out in the following amendments. I am sure that the hon. Member for South Thanet has strong views on that, and her history of involvement in consumer rights in the public sector will come into play. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68 ordered to stand part of the Bill.

Clauses 69 and 70 ordered to stand part of the Bill.