House of COMMONS
MINUTES OF EVIDENCE
BUSINESS & ENTERPRISE COMMITTEE
LORD WHITTY and MR ED MAYO
USE OF THE TRANSCRIPT
Taken before the Business & Enterprise Committee
Peter Luff, in the Chair
Mr Adrian Bailey
Mr Brian Binley
Mr Lindsay Hoyle
Mr Mike Weir
Mr Anthony Wright
Witnesses: Lord Whitty, a Member of the House of Lords, Chair, and Mr Ed Mayo, Chief Executive, gave evidence.
Q1 Chairman: Gentlemen, thank you very much indeed for coming to this Committee for this one-off evidence session on Consumer Focus. We were hoping to hold it a couple of weeks earlier but that proved impossible. Never mind. We are now in business. Thank you for your kind words about our report yesterday on the Post Office Card Account. That is a very good precedent for witnesses to have set, to flatter the Committee before they come in. It is a good strategy which I commend to other witnesses. Let me ask you, as I always do to begin with, to introduce yourselves for the record.
Lord Whitty: I am Larry Whitty. I am the Chair of Consumer Focus.
Mr Mayo: I am Ed Mayo and I am the Chief Executive.
Q2 Chairman: At , we will interrupt proceedings for two minutes. I will invite the Committee, witnesses and members of the public gallery to stand for two minutes' silence in accordance with the Speaker's wishes. Thank you very much. I was involved in the debates about the establishment of your organisation and this Committee has taken a close interest over the years in Postwatch and energywatch and consumer affairs generally. I have to say that I still find this new system incredibly difficult to understand. This is a confession from the Chair that may shock you: I did not even know there was a thing called the Postal Redress Service until I read the brief for today's meeting. I have seen no public mention of the Postal Redress Service anywhere. There is the Energy Ombudsman, an energy redress service, Consumer Focus, Consumer Direct, I think the National Consumer Council still exists, there is a service funded by the OFT, then there is water which often causes concerns, and the financial sector has a different system. I asked the Committee before you came in. We find it very confusing and yet we are supposed to signpost our constituents to solutions. It does look very, very muddled.
Mr Mayo: I do want to apologise to the Committee for getting the dates wrong at an earlier point and thank you for seeing us at this time today. In some ways, I think is a more complex system. You are right to say that with energy issues, in particular, if you had a problem you would go to energywatch, if you had a problem with the post you would go to Postwatch. Now consumers have additional rights: the ombudsman scheme, and a similar scheme in post, new rights for consumers to get problems solved. However, if you look at consumer affairs in general this is a sensible rationalisation. If you had a problem as a consumer before, with postal issues you would go to Postwatch, with energy issues you would go to energywatch, and if it was advice more generally then you would go to Consumer Direct. It seems to me entirely sensible to bring together the different advice lines into a single point of call for consumers, which is Consumer Direct, run through the Office of Fair Trading. To bring together the fragmented, piecemeal, and sometimes cheese-pared consumer organisations into one single organisation is a change. We have looked at some of the communication that you as MPs have had from BERR, and I think it probably fair to say that a better job could be done. We can play our part in doing a better job to explain what the changes are.
Q3 Chairman: I think it is rather important. I had a communication with Ofgem which seeks to explain how we should now deal with energy complaints. It refers to the Energy Ombudsman but gives no details of how to contact the Energy Ombudsman. It is a little card to send to constituents which would be of no use at all because there is no contact detail. I really think there needs to be some urgency in clarifying the system, setting out a coherent way in which consumers of all utilities and other public services should complain, including issues that go beyond your remit, to make sure there is a one-stop shop to source advice on how to complain.
Mr Mayo: I think that would be very welcome. There are complaints right across the economy, including in public services, as you have said. Some of the recent work or previous work by the NAO has pointed that out to be a real area of weakness. For simplicity, the simple headline message, I would repeat - and this is not about our work, because the Act that set up Consumer Focus set us up as an advocacy body, Consumer Direct does the advice work - is that if anybody has a problem with any consumer issue at any point in time they should ring Consumer Direct on 0845040506. That is a single point of information that can put you through whatever problem you may have. At its front end, I think it can be simple.
Q4 Chairman: You see, I did that, myself, as you might expect. We had a problem with a post office closure, and I could not trace down Postwatch. I could not recall how I should take on the appeals process for a post office. I spoke to one of the ladies at Consumer Direct, who said, "Oh, yes, there is a dedicated number for that now," so I went to that number and it turned out to be the Royal Mail Group and was not a consumer line. Contacting Howard Webber of Postwatch is surprisingly difficult. Your website gave the wrong telephone number. It is a mess. I think the timing of Postwatch's abolition was curiously unfortunate. It is a shame that this did not take place in the spring, after the process was over, but it is difficult. The Consumer Direct people did not seem to know quite how to handle a Member of Parliament who wanted advice.
Mr Mayo: That may be worth taking up with Consumer Direct, but I will pass that information on, and I have to say that that is not an isolated incident. The changes that we had over 1 October took place at a high risk period. If you want views on timing, Larry might give his views as well. We were making this change, it was a complex change, bringing together three organisations - but not simply into one because the consumer handling was moving over to Consumer Direct - it was a high risk project to run, and the timing did make it of far higher risk. It was a time of rising energy prices, still high, with the Post Office Network restructuring programme still underway. I think we did carry off a complex project without loss to consumers, but there have been one or two cases - and this is clearly one of them - where the information was not right. By and large, however, I can report to the Committee that the early evidence is that the handling of energy and postal complaints seems to be happening in a smooth way, and, also, the new arrangements are working well in terms of what was intended, which was to get things right in the first place rather than have to put problems right after. All of this change is about trying to tackle the problems at source.
Lord Whitty: I think it is important to recognise that our role is exactly as it says. We are there to set the framework for dealing with issues. Whilst we do have a safety net role in dealing with individual complaints, the front end of complaints is dealt with by Consumer Direct. I think the example you have given is probably a slightly off centre example, in that general mail complaints are being referred sensibly through Consumer Direct. The Post Office closure programme of course has continued for a little longer than was originally estimated. I will make a point about timing, which is not quite the same point. You may recall when the legislation was originally proposed that it was intended that the new organisation would be set up in last April. For various reasons relating to the delays in getting their legislation through but, also, I think some assessment of the Post Office closure programme, the view was taken that it should not come into being until 1 October with its powers, and that there should be a two-stage programme where we took over responsibility of the staff on 1 July and be in full operation from 1 October. I would not recommend that for any other public sector merger. Either we should have taken over the responsibilities of energywatch and Postwatch entirely as of 1 October and run them as a central organisation for that period or everything should have happened on 1 October. Doing a two-stage process was not particularly helpful, and I think in the circumstances we managed it, but it was the decision on timing that was probably the wrong one. We came through it. We have established the organisation. We are up and running. Indeed, on the Consumer Direct front I was very worried about that situation two or three months ago but I think most people's experience of going through Consumer Direct for energy and post purposes has been positive and it has been dealt with at least as effectively as previously.
Q5 Chairman: Until I read the brief for our meetings I was not aware that you have obligations to investigate complaints yourselves in relation to vulnerable customers; a complaint by a consumer where the Council considers the subject is of general relevance; disconnections and failures of pre-payment systems; and complaints to the Postal Services Commission in certain circumstances. It is not absolutely clear cut, but for ordinary consumers you say that it is Consumer Direct first and they will always signpost in the correct direction and give advice on where the complaint should go.
Lord Whitty: Always is a heavy obligation, obviously.
Q6 Chairman: It is quite important.
Lord Whitty: That is the intention and no doubt you will discuss with OFT and Consumer Direct how they are doing it, but the experience at the point of changeover, which was very high risk, was that at one point it looked as if the OFT were not going to get their ducks in a row. They did do it, however, and in general it has worked extremely well. We do have a second tier absolute obligation in cases where cut-off is threatened or has happened. That is our clear obligation. We have an obligation also to look after the interests of vulnerable consumers which would be passed on to us mainly from Consumer Direct calls.
Q7 Chairman: In relation to issues of general relevance that you need to know to do your work, your advocacy, your information role, you are convinced that you will access that information and that you will know what is going on.
Mr Mayo: We have an arrangement with the OFT, Consumer Direct, the ombudsman and other sources of information, to be able to spot trends in the market, trends in complaints, so I am reasonably content that that information will be available and we can make judgments as to whether to take a complaint of general interest. There is a strategic decision behind that as to which ones we take, but I think we will have the information.
Q8 Chairman: Do the Energy Ombudsman and the Postal Redress Service need to be visible to consumers directly or do they not need to worry about them too much because they will get referred on by Consumer Direct if it is appropriate? The Postal Redress Service is almost totally invisible.
Mr Mayo: That is fair to say in these early days. It is a good question about people's advice seeking behaviour, as to what they need to know. The idea of an ombudsman is increasingly recognised. What is difficult for consumers is that some markets have an ombudsman and others do not. There are big areas of consumer complaints which have no ombudsman at all, so no recourse to alternative dispute resolution. I think other countries have handled this by having ombudsmen who take a broader role, so that if you have a problem you know you can turn to an ombudsman for dispute resolution. The focus probably needs to be on widening the profile of Consumer Direct. They handle very significant numbers of calls at the moment. They are relatively young as a service and do a good job, but I would put the emphasis and probably any money that is there into building the awareness of Consumer Direct, which can then pass people on to where they need to go
Q9 Chairman: If I could make a detailed point, a niggle really, obviously we all love the internet and we all use it all the time but one of the problems is that information can disappear from the internet all too easily. Hard copies cannot disappear but web pages can disappear. So have the pages of Postwatch and energywatch. They have miraculously disappeared. All their old reports, publications, are no longer available. They have gone. Why?
Mr Mayo: I can send you the links or the information in order to get through to that. We will have that available. There will be archive that is there. Much of that information which is live; for example, critical information about social tariffs or energy information is on the site. Like all websites, everybody says, "Our website is under development" and that questionably is the case for us as well. We started with a relatively simple website and so the functionality is not there. But, no, we can get through to that.
Q10 Chairman: The old cynic in me thinks that Postwatch and energywatch were abolished in part because they were too effective and making the Government's life a bit too difficult. Mr Asher is a pretty outspoken critic of the energy sector. We do want to see access to historical comments and documents.
Mr Mayo: That is very welcome and I would endorse the comment. My view is that Postwatch, energywatch, and the National Consumer Council were high performing organisations and I am proud to take an organisation forward that has that kind of track record and that expertise. It is good to see changes coming through in the energy market, for example, from the Ofgem probe, that reflect your work as a Select Committee but also the input of the energywatch team, including Allan himself.
Q11 Chairman: Could you give us an account of how you are going to do your work on this role now. Obviously people like energywatch did a lot of background work, a lot of research and very thorough, detailed work. I did not always agree with Allan Asher, but whatever you made of the conclusions, they were always based on a lot of serious analysis. How are you going to influence the political process now in relation to the policy areas that are currently your responsibility? You have made some comments in the public arena but what work are you doing to underpin your comments?
Lord Whitty: You will have seen our forward programme of work, some of which is taking forward work done by the predecessor organisations. In relation to energy particularly, one of our major pieces of activity at the moment will be on fuel poverty for fairly obvious reasons. We have been very active on that front. We do of course inherit not only the remit of energywatch but also a significant number of staff in the policy and analysis area of energywatch - one of them was on the box last night - who carry forward the whole energywatch tradition in relation to energywatch prices. That material is there. It is not lost on the website, in the ether or anywhere else. We have it and it is embodied in some of our staff and the material that we have. I should make the point that in policy terms and campaigning terms we are the best resourced that any combination consumer organisation has been. Our budget, our staffing and our remit are broader in scope than the combination of the policy bits of the predecessor organisations and whatever has gone before.
Q12 Chairman: We will come back to postal services, but there is big work to do in energy and postal services at present which will require some very thoughtful analysis. You are able to assure the Committee that analysis will still be done.
Lord Whitty: Indeed, yes.
Q13 Mr Binley: I wonder whether you have enough people to do the job that you are supposed to do. I want to talk a little about the costs related to that scenario. You will know that the bodies you are taking over from employed 396 people when you took over. I think your core staff is 170 now. That is a drop of 60%. How are you going to do the same sort of work with that sort of cut in staffing levels?
Lord Whitty: As I was just explaining, we are not doing the same range of work. A large number of staff which energywatch and to some extent Postwatch had were on complaints. That is primarily the responsibility of other organisations, recently Consumer Direct.
Q14 Mr Binley: I understand that.
Lord Whitty: That accounts for the bulk of the loss of staff from energywatch and Postwatch. We will have a core staff of 170 people which will be more than the combination of staff who were directly funded in the previous organisations on campaigns, on policy, on research, on analysis. We also have a larger research budget than the predecessor organisations had. I am sure Ed can go into the figures and there are more if you would like them.
Q15 Mr Binley: I noticed that. Because you are cutting costs at only 45%, if you look at the matter in those terms you are getting more money. I think you are getting about £88,000 per person. That is a lot of money, is it not, for your core staffing figure? What are they going to be doing for that money?
Mr Mayo: Our focus is on campaigns and
advocacy, so we have an expansion of the resources and effort on campaigns and
advocacy compared to the three organisations that were there before. The logic of bringing together three
organisations around these is so that we do not have to look at issues in
silo. It is much more sensible to look
at Post Office issues if you can also look at other community services. In terms of a vision for the future of
a sustainable network, it is helpful if we can look at the energy issues
that energywatch did and also at sustainability and climate change issues in
the way that the National Consumer Council did. Bringing those together makes sense. There are some opportunities, as well, around
new roles. For example, I will bring in
a chief economist. That is a really
helpful addition because so many consumer issues are affected by economics and
economic policy, the working of the markets.
A chief economist will be able to contribute to our thoughtful analysis.
I take your point, Chair, about the
predominance of commentary rather than research and I think is an "early days"
phenomenon for a new organisation. The
work is going to focus on campaigning and advocacy, to make a difference for
consumers. A comparison with the three
organisations that were there before is more of comparison of apples with pears,
because a significant amount of what they were doing included this work around
complaints handling. Indeed, one of the
criticisms from the National Audit Office, amongst others, and the Public
Administration Committee, if I am right, was that the complaints handling can
crowd out that key campaigning work and yet it is the campaigning work that
stops problems happening in the first place.
It is alive to new issues. That is the core of what we are doing. We have offices in
Q16 Mr Binley: So it is a conscious management policy to ensure that you employ better people with more multi-skilling in that scenario.
Mr Mayo: We have taken as many staff
as we can from the current organisations.
There is something of a mismatch, in some sense. Postwatch, for example, had an extensive set
of offices outside of
Lord Whitty: The other point in relation to your figure for members of staff is we have a large research budget which would account for £3 million. If you spread that over the staff, you get a much higher figure but we would be commissioning research and engaging others in research.
Q17 Mr Binley: One does assume on that basis that you are paying more money for better people. You are telling me it is not the case. You have taken many of the people who were in the existing organisation.
Lord Whitty: As of now, we have roughly filled half of the permanent staff. There are some people covering transitionally. When we are fully staffed, half of our staff will not have been in any of the previous organisations. That will be the situation come February roughly.
Q18 Mr Binley: They will be of higher quality with a greater skills base?
Mr Mayo: I would not characterise it in any way that we are bringing in better staff at higher pay. We have a fantastic set of staff teams from across the three organisations. The vast majority of the senior roles, at pay which is commensurate with what they had before, would be taken over from the three predecessor organisations. There are some specialist skills, like those of a chief economist, which none of the three organisations in their smaller functions could have afforded to bring in. There are one or two cases like that.
Mr Binley: I would like to go on to the costs of Consumer Direct. On our own figures, you say it is about £8 a call, which I presume is about two calls per operator hour or something of that kind.
Chairman: This would be more appropriate on OFT's questions.
Mr Binley: Yes, but it is in the briefing and I would like to understand a little more about it. That is a costly operator response level, is it not? Would you look at that for me? If you look at the private sector the average is about £4 per contact and you are talking about £8 per contact. I wondered what made the difference.
Chairman: It is more for the Office of Fair Trading to answer this question.
Q19 Mr Binley: I understand that, but we have already said on this issue, if you were to ask the question, Chairman, that you would get the answer, so I assumed the same thing would apply to me.
Mr Mayo: I would be very happy to talk to colleagues at the Office of Fair Trading to get that information.
Q20 Mr Binley: I would be most grateful.
Mr Mayo: I think you can take some comfort from the fact that there has been a good deal of attention across public services at improving the cost-effectiveness and the performance and the experience of users in relation to public sector call centres, so there has been a very strong focus on that. There are good benchmarks in terms of the efficiency there. Consumer Direct, I believe I am right in saying, comes out quite acceptably on that, but I will follow up with colleagues at the Office of Fair Trading to get you an answer on that.
Q21 Mr Binley: You have talked about skills and mapping those skills. How are you doing that? How are you making sure that you are covering it in more detail? That is a pretty important part of the set up procedures, is it not?
Mr Mayo: In terms of designing the new organisation, we have looked at the core competencies that we need in order to be able to carry out our work. It is a unique privilege in some ways designing a new organisation. It is like setting the DNA of something that then really needs to work over time. The National Consumer Council operated for 30 years, and energywatch and Postwatch for a shorter period, so we have been quite careful in designing in the skills and competencies that can reflect a very fast-moving consumer experience and consumer market. If you look at online, for example, things are moving incredibly fast with the emergence of new consumer communities on line and therefore building in more of a capacity for online action.
Chairman: It is coming up to , so I would invite everyone to stand.
There followed two minutes' silence.
Chairman: Thank you very much.
Q22 Roger Berry: I have to say, like the Chair I find the system somewhat confusing. I guess I voted for it, so I should not, but I am slightly more worried about consumers. The basic thing consumers want is advice. They want support. They want a complaints procedure that they understand. The first port of call is quite important. Let us take the postal service. Your website suggests that a complaint in that case should go to the postal provider, but then you go on to say that Consumer Direct can also give advice and information. Do you want people to go to the postal service provider or do you want them to go to Consumer Direct?
Lord Whitty: I think you probably have to go back to government and eventually Parliament's general strategy on this. In the regulated areas providers are pretty poor at dealing with complaints. We need to improve the way in which they deal with complaints themselves. The regulator has been given responsibilities for setting standards which they are now enforcing via Postcom and via Ofgem. We want consumers to be able to get better handling of complaints if they are going to the provider. If they are unsatisfied with that or unsure who to go to, then they go to Consumer Direct right across the board. That is the port of call. In energy, the reality is they were ringing the same call centre as dealt with energywatch's calls to start with. There is a continuity there which is hidden by the change of organisation. First: try your supplier if you know who that is. If you do not know who your supplier is or you have had no joy with them, then go to Consumer Direct.
Q23 Roger Berry: Has that advice, for example, been made clear to organisations like the CABs?
Lord Whitty: Yes, we have had very detailed discussions with the CABs and other bodies.
Q24 Roger Berry: They have been given clear guidance on the direction in which inquiries or complaints for advice should go.
Lord Whitty: Yes.
Q25 Roger Berry: I would be quite interested to see the sort of advice given to CABs in terms of these areas.
Lord Whitty: Yes.
Q26 Roger Berry: The next question is about Consumer Focus and Consumer Direct. Understandably, you have made the distinction of the responsibilities and who is responsible for Consumer Direct. Is there not a problem here? Do you not think it would have been better if Consumer Focus had had the responsibility for the Consumer Direct service rather than it being a completely different enterprise?
Lord Whitty: It could be argued, but government and Parliament took a different view. We are here to defend and advance the cause of Consumer Focus. You could have designed the totality differently, but of course Consume Direct already existed prior to the legislation as a service run by OFT on behalf of consumers generally and there was no appetite for shifting that out of OFT's remit on to another body. For us, there are some benefits, certainly at this stage of our existence, in focusing on advocacy, campaigning, policy, and dealing with government and business. In those areas there are benefits which maybe you would want to subject to review further down the line, and there are bits which are still with OFT and central government, including Consumer Direct, including consumer education, which perhaps at a later stage you might want to look at again. But the rationale was not ours, it was what government and Parliament delivered to us.
Q27 Roger Berry: A phrase about Consumer Focus sitting behind Consumer Direct was used earlier. What does that mean?
Lord Whitty: That was in relation to our role in dealing with individual complaints, urgent and vulnerable consumer complaints. If they are not resolved at the first line and not resolved by the company then we have an obligation and a remit there. That is in relation to complaints. It is not hiding behind or sitting behind Consumer Direct in general. We are a very upfront organisation.
Q28 Roger Berry: Lord Whitty, during the second reading debate in the Lords, in relation to the energy sector you said, "The existing ombudsman system in the energy sector is not up to scratch for the job that is envisaged in this approach." Indeed, you made comments earlier in a similar vein. Do you believe that the Energy Ombudsman is up to scratch to carry out the task?
Lord Whitty: The Ombudsman, as I recall, was rather upset by my remarks in that respect. She got quite stroppy with me. The point I would make is twofold. At that point the only scope for the Ombudsman related to billing, whereas complaints about energy companies can range from connections to repairs, to meter readings and so on. That was not then covered by the voluntary ombudsman service. The statutory ombudsman service covers everything. My other complaint was that it took rather a long time for complaints to be dealt with by the Ombudsman. I think a regulatory intervention has reduced that time somewhat. I think it could probably do with a further reduction, but the maximum now is eight weeks whereas at that time it was three months. There were a number of failings of the Ombudsman. The regulatory framework has changed.
Q29 Roger Berry: Can I take you to the Extra Help Unit. As I understand it that, amongst other things, will accept complaints from MPs. This obviously raises the question: Is it widely known? Unless we keep it a secret, does this not mean that anybody who has a serious concern or complaint will go straight to their MP because they will send it straight to the Extra Help Unit, and we will be in the ridiculous situation that we have had with the CSA: "No reply unless you contact your MP," and with tax credit problems. We of course as Members of Parliament wish to serve our constituencies at any conceivable occasion, but we all know that we spend hours and hours every week as sort of postal workers, passing on complaints from constituents to the relevant body, because they believe and we know that we will get the reply and they will not. This Extra Help Unit worries me in that respect. Is that not the obvious way?
Lord Whitty: Here we were thinking we were doing you a favour.
Q30 Roger Berry: I am sure you were.
Lord Whitty: We were trying to preserve the fact that prior to the change you were able to get straight into Energywatch and their backup complaints handling service - not their frontline but their backup. We did not want to take that away from you. The situation has not change with regard to that, therefore. If you and other Members of Parliament start getting more work, then there is something going wrong with the system, so we need to know about that. If that does start to happen, then OFT and ourselves need to address that.
Q31 Roger Berry: I understand and appreciate the need for organisations to be encouraged to respond to MPs inquiries quickly, but are you not concerned that evidence from elsewhere - and the CSA is a classic of course - is that if the system is run so badly that people realise that going to their MP is the only way to get a reply, then this will increasingly happen. Will you be observing that experience and taking appropriate action if that turns out to be the case?
Lord Whitty: We will indeed, because it is not only an increase in work rate for you, it will also be an increase in the work rate of the Extra Help Unit. If it gets serious, we will have to pick that up. As I say, it is the totality of the system which will need addressing in those circumstances. It is not that the consumer does not have somewhere else to go - in this case, they have Consumer Direct to go to, they have Consumer Direct's sign pointing them into the provider companies. I do not anticipate that this will happen, but if it does happen then we and OFT will have to address it. I also emphasise that what we are proposing is no different from what existed with Energywatch prior to the change.
Q32 Roger Berry: For small businesses, a large proportion of their complaints are about energy issues. The Federation of Small Businesses have expressed concerns about the new arrangements, as you know. They feel that the advice and support being offered under the new regime is such that it is only offering a limited service to small firms. Have they misunderstood the new procedures in saying that?
Lord Whitty: We are primarily a body which is focusing on the individual consumer, however we do recognise that a number of businesses, what I would describe as the vast majority of businesses, micro businesses, suffer some of the same difficulties in relation to the energy sector and in many cases the postal sector that an individual does. In those circumstances, in policy terms and in Consumer Direct and in the Extra Help Unit we would look in terms of complaint handling at treating micro enterprises roughly the same as individuals. There is a different issue relating to the somewhat larger firms. We are not primarily an organisation which looks after the interests of small business, medium size business or large business, though some of their problems are exactly the same as those of the general consumer. In terms of micro businesses, Ed may want to say something about the piece of research on their consumer concerns that we have started to do already.
Mr Mayo: In brief, what you have outlined in terms of the small business experience of the energy sector is also amplified across other sectors. Once we start to look across the piece, which is something that we could do, a pattern emerges where particularly the smallest businesses may be losing out as consumers of services from other businesses. We have launched as part of the research work - it was the first piece of research that we launched - a study to look across the piece at the consumer experience of micro-enterprise. I think that is a unique study - that has not been done before, although there is experience in energy and in post. We are going to look at that to see what we can find. There may be interesting issues for you as a Committee to look at, such as whether there is greater consumer protection for individuals than there is sometimes for micro-enterprise. Would it be good to stimulate enterprise development if there was better protection for micro-enterprise in relation to some of these services; for example, in a rural setting, where some of these things are compounded? We are interested in trying to use the fact that we are a joined-up organisation across the piece to have a wider look. In that, we are collaborating very closely with the Federation of Small Businesses, the Chambers of Commerce and some of the other very effective small business representatives that are out there.
Q33 Roger Berry: That is very helpful but the specific point the FSB have made is that something like 30,000 calls have to be made each year to energywatch from small businesses and with the new set up they are obviously concerned that the kind of service that used to be provided to these 30,000 calls will not be met. Are they right to assume that, or do they have it wrong? Do you have the capacity to provide the kind of response to small businesses that has been provided in the past?
Mr Mayo: I would argue that they are wrong but I think that plane needs to be tested against the evidence. It is still very early days. I would argue that the treatment for businesses ought to get better because of, first, the ombudsman scheme. Energywatch could never get a company to do something, they could only charm their way in by going in at a higher level than individuals or businesses could go into. The ombudsman scheme has now been opened out to small business, which gives them much greater rights in terms of that. Consumer Direct is handling business inquiries - although it is an important point to make sure that is promoted and understood. The Extra Help Unit that we talked about earlier for vulnerable consumers absolutely applies to vulnerable business consumers as well. I am confident that the new system should be delivering a better deal for small businesses but we will want to review what we are doing to make sure that happens.
Q34 Chairman: Could I just check one thing. You are still legally the National Consumer Council. That is your legal name.
Mr Mayo: That is our statutory name.
Q35 Chairman: You chose to be called Consumer Focus. That is your choice.
Mr Mayo: Yes.
Chairman: I think it is slightly difficult for people who are not experts to try to understand the difference between Consumer Focus and Consumer Direct. I think the names are bewilderingly similar myself. But that is personal observation which colleagues might not share. Those who are not experts might find it difficult to understand the distinction.
Q36 Mr Weir: In your forward work programme you make the point that in a time of economic uncertainty there is urgent work to be done. Both of you this morning have emphasised several times that your role is mainly in advocacy. Can you tell us a bit more of the role you see Consumer Focus playing during the current economic slowdown to ease the effects on consumers?
Mr Mayo: One of the first things we did when we started was to organise a round table of consumer organisations and advice organisations and credit unions and others, to have a look at responses to the current financial turmoil and the contagion that was there. Coming on from that, we looked at the particular context of the Lloyds TSB HBOS merger and the consumer interest in relation to that. That is something that obviously the Office of Fair Trading has made an input to and it has been discussed in Parliament but we came forward with what was quite a creative set of ideas about what might service consumer interests better if that merger goes ahead and competition rules are waived. For example, we have argued - and we will take this case to the Lloyds TSB on a voluntary basis because competition authorities are not able to make this happen - that the Lloyds TSB and HBOS, if that merger goes ahead - and that is in the news at the moment of course - should be selling off branches to its competitors rather than just closing down branches, because it would reduce competition at a local level quite considerably if you have two of those banks now coming down to one or three with a third coming down to two. We think of campaigners pointing to problems and chasing down problems but we can also come up with solutions in that area as well. You will also be aware from the work that you have done that we have a very strong interest in energy prices. We are launching the next phase of our campaign to break down energy prices with the Daily Mirror tomorrow. We will do all we can to encourage a public setting in which at least one of the companies can break ranks and bring retail prices down in line with the reductions that we have seen in the wholesale market. These kinds of changes, if successful, can put money in people's pockets and make sure that they are better served by essential services over time.
Q37 Mr Weir: One of my colleagues was asking more about energy and I have some questions about Lloyds TSB, but, before we go on to that, I was interested in what you say about your meeting with credit unions and other consumer bodies. Presumably there will be increased pressure on many of these bodies during an economic slowdown of people seeking help. Can you give them any direct help in dealing with people who come to them with financial problems during the recession period?
Mr Mayo: We will work very closely
with the face to face advice agencies but without in any way duplicating their
work. We have an expertise, particularly
around the energy side and the postal side, and so we have developed an advisor
service of volunteers in advice bureaus and the like to be able to email
through questions and get a response. We
have developed that on the basis of a structured survey of advice agencies'
needs. We will support them very closely
in that, but we will not duplicate the work - particularly that of the money
advice sector, which across the
Q38 Mr Weir: Moving on to Lloyds TSB, your letter to Lord Mandelson raised certain issues relating to that. Obviously Lloyds HBOS, if the merger goes ahead, will have a considerable share of the market; for example, 30% of the market in mortgages. Do you not feel that allowing anybody to have such a large stake in the market at this stage, irrespective of the particular circumstances that led to this, is going to make it more difficult in the future to prevent other banks increasing their stake in the market?
Mr Mayo: Yes. It is our job to be sceptics on behalf of consumers. We do not like to see potential players that may be dominant in the market. We do understand the urgent circumstances and the need to act to secure the credit and financial system. I do not think it was for us to stand up and oppose the merger but I think it was for us to say that there are long-run consumer issues here that require strong regulatory scrutiny. Therefore, when we called on the Office of Fair Trading, as we have done, to launch an ongoing investigation into the mortgage market, as they have been running a personal account market, that was in order that the authorities could be ready to act if there was any evidence of abuse, because otherwise their system takes a long time to deal with these problems.
Q39 Mr Weir: I appreciate that but by doing this are you not saying that 30% of the market is acceptable and not damaging interests of consumers by allowing this to go ahead.
Lord Whitty: No. The reason we have asked the OFT to have an ongoing monitoring of this situation is that, normally, in almost all circumstances, 30% of the mortgage market, 30% of the retail banking market, is not in the best interests of the consumers. We need to maximise competition, not to limit it. The issues in the Government's judgment and to a large extent the financial sector's judgment was that the alternative was for HBOS to go under. If HBOS went under, then clearly not only the depositors and account holders in HBOS would suffer severe consumer detriment but competition would have been lost by that reason. In emergency circumstances, we did not oppose the merger but we made it very clear that this is not a normal circumstance and that we would want the implications of that merger to be continuously and effectively monitored by the authorities.
Q40 Mr Weir: In your own letter you point out that an alternative would have been the recapitalisation of HBOS as an independent entity.
Lord Whitty: Of course they did both: they recapitalised HBOS and they allowed the merger. The Government's judgment was clearly that recapitalisation, at least at the level the Government were prepared to do it, was not sufficient. I am not arguing with the Government's judgment on that, I am just saying the concomitant of that is a very, very close watch on what the effect of that is on the market, on competition, and on consumers. In the short term, if we had opposed the merger, we would not have been doing consumers any favours.
Q41 Mr Weir: At the same time, one of your suggestions was there should be a sunset clause on, if you like, the waiver of the competition rules. Presumably that is to prevent any further mergers of this nature going ahead. Will the OFT be looking at the position of the merged bank in the future if they continue to have such a huge share of the market?
Lord Whitty: Yes is the short answer to that. Yes.
Weir: You talked about HBOS or Lloyds selling off
some of their branches to competitors.
There is a particular situation, when you talk about 30% of the market,
Lord Whitty: Yes.
Mr Mayo: That is very apposite in
terms of the approach we take. We
operate across a devolved basis, which is one fundamental way in which we
can look at different markets. The
operation of Consumer Focus
Q43 Mr Weir: In recent years most banks have been closing branches rather than opening branches, with many of them moving onto the internet. How feasible is it that other banks are going to be interested in buying closing branches?
Mr Mayo: I do not think we are talking about very large number of banks here. This is about local monopolies and therefore they have to be tackled at a local basis. It is incumbent on Lloyds TSB, if they did go ahead with this merger, to make sure they were not acting in an anticompetitive way. We have also suggested in a modest way that we might set up a consumer panel to be a scrutiny for them. That is a slightly hippy suggestion in some ways, but we do think it is important, if we are not to bring a super complaint in relation to anticompetitive behaviour or the regulators do not take action, the need to bend over backwards to make sure they are behaving correctly throughout this. We would welcome that.
Q44 Mr Weir: What do you consider to be a local monopoly? You have four banks in the Scottish sector. You are going to lose one, almost inevitably, and be down to three. Do you consider three banks, with the absence of one, as being a local monopoly? Or is it just reducing choice from four to three?
Mr Mayo: Better people than me could
answer that question in terms of the competition economics that surround local
monopolies. It is a new area for
competition policy. It has been
developed very much in the field of supermarkets and pharmacies by the
Competition Commission. One of the areas
in which we are interested, given particularly our focus and expertise on the
Post Office Network, something of concern to the Committee, is to look at
issues around access on a geographic basis and other bases as well, to see what
access people do have to central services.
The bank branch closure programme has slowed down since that which we
saw in the 1990s. It may well speed up
again with some of the change we have seen.
There are other losses. There is
the loss of pubs and other amenities at the local level which means to say that
issues around the local market are clearly going to be important to look at. My honest answer is that there is a technical
definition of local monopoly, and a better competition economist than I
would be able to make that input. There
has been an investigation in terms of the banking sector in
Chairman: I know two swallows do not make a summer but a picture possibly emerging here is that we have the Lloyds/HBOS merger, competition literally swept away to meet a particular need, we have the EDF purchase of British Energy, competition issues swept away to meet another particular need. You have been very vigilant and there are some very difficult decisions on these issues.
Hoyle: Can we take you on to energy? We all know that we live in rip-off
Lord Whitty: The powers, of course, rest with the regulator and we have been very assertive in asking the regulator to take a harder look at what is happening in two senses in the very immediate term. We have said that when energy prices were going up the lag between the price they were paying in the market and the price increase to consumers was pretty rapid. Now they are coming down it is significantly less so. Both energy companies and Ofgem have taken exception to what we have said but we believe the statistics, taken overall, do prove that, so we are therefore campaigning for general prices to come down more rapidly than has hitherto been the case and also wholesale prices have reduced. We are also campaigning in relation to the distribution of those tariffs and prices in an area essentially of fuel poverty, although there are other areas.
Q46 Mr Hoyle: I will bring you on to that. I just want to know what you can do on this and I will come on to fuel poverty next.
Lord Whitty: Part of what we say is, is the tariff structure fair, which includes fuel poverty. There are other unfairnesses in the tariff structure. It is not just a question of the average level of price. It is a question of how people are unfairly dealt with under the present system, which will include prepaid meter customers, will include those who are off the gas pipeline, will include people who have retained as their supplier the original regional incumbent, all of whom appear under the present system to be unfairly dealt with whatever the average level of price. We campaign on all of those.
Q47 Mr Hoyle: We both know that gas has gone up 51% since the beginning of this year, electricity has gone up 28% this year. We were told all the way along oil and gas are linked, that is the way it is, that is why gas prices have gone up; yet we know that oil has dropped 50% and yet gas has not moved. Therefore, for all you are saying, what can we do? Is there any more we can do, apart from standing on the side shouting, "We don't think this is right"? Do you somebody should have teeth? Do you think you should have teeth to try and get these prices down?
Mr Mayo: On some of these areas Ofgem is the regulator. It has got the teeth and it ought to bring prices down.
Q48 Mr Hoyle: We all know Ofgem has no teeth whatsoever. Come on. That is why prices are so high. Let us not kid ourselves. It is a toothless tiger.
Lord Whitty: One of our central roles is therefore to address Ofgem's remit, which is largely set by Parliament under a number of Prime Ministers, and to address the way in which Ofgem attack their remit, and we have points on both of them. We do not have the power of the regulator but we do have the power to attack the regulator where we think they are doing it wrong, attack the companies where we think they are doing it wrong, and to raise in certain circumstances general issues with the regulator. We do not want to be the regulator. In that sense we are always on the sidelines, we do not have the direct powers given to us by Parliament for that, but we can embarrass, pressurise and advocate change here to the regulator to do an effective job.
Q49 Mr Hoyle: It took Energywatch to say there was a real problem in the market that actually got Ofgem to waken up to do a report and investigation into it, so we all know that Ofgem are fast asleep, are comatose, when the problems are going along, and it took your previous organisation to give them a nudge, along with this Committee, because this Committee is very good at standing up for the consumer.
Mr Mayo: The issues in terms of the underlying market have not been resolved by the Ofgem probe and therefore some of the issues that you looked at in your early summer report around the wholesale market in particular. The retail sector is inextricably linked with the way that the wholesale market works and, Chairman, you commented on the takeover of British Energy. Again, we are just going to reduce liquidity. On your point about the oil price gas link, that is an area where we picked up on Energywatch work in terms of writing to Commissioner Cruz to ask her to explore whether there are any cases to see whether the oil link is an abuse of the articles of the Treaty and that may lead to change. The work on the fundamentals of the market are important in relation to that and could lead to change. Our other role in terms of companies is to argue for one of the companies to break ranks, maybe EDF Energy if they are long on power after the takeover, but we have seen the energy companies act like a herd in terms of putting up prices, and if they act like a herd in delaying bringing down prices now that the wholesale price for both gas and energy has come down very significantly, and, as you said, oil as well, I think that would raise further questions about the nature of this market. Ofgem's conclusion that there are no smoke-filled rooms and collusion does not answer the question that in a market with six dominant suppliers you do not need to get into a room to work out what the prices ought to be.
Q50 Mr Hoyle: I cannot disagree with anything you have said. What you are trying to say to me is that they do not work in the consumer's favour, in fact, they work against it, so can we agree that it looks like there is a cartel operation here?
Mr Mayo: A cartel is one of those areas where Ofgem throw barristers at me and say, "Get the definitions out". I would not regard myself as an expert on that. We do think that the market is broken. We think that the Ofgem probe, despite the headline that the market is working but these are these fundamental problems where people are losing out so significantly or if you are not on dual fuel or if you are in the original regions for the incumbent, shows that the market is broken and there is a good deal more work needed to be done. This particular issue that you reported on as a Committee about it not being clear what is bought on the wholesale market and what is bought spot or forward is a key area still for uncertainty because in some ways we were assured that companies were using the spot market, in which case they ought to be benefiting from the reduction in wholesale prices that we are seeing, but in some sense we get the response, "Oh, no, we have bought forward at £100 a therm", or the like, a rather bad business decision in retrospect, "and therefore we have got no room for manoeuvre". It is very hard for us to tell and therefore I think one of the areas that we need to look hard at is getting better information out there, either us asking for that information or the regulator doing the same or you as a select committee or future select committees in that regard.
Mr Hoyle: There is one thing for sure. Rather than getting upset by the word "cartel" and issuing writs and legal proceedings the best way to show there is no cartel is to see them reducing the prices, so maybe we ought to get that message across: the sooner they do that the less likely we are to worry that there is a cartel in operation. Can I take you on to something that you were going to touch on, prepayment meters, people who pay their bills up front? Why is it that they seem to be on the wrong end of the energy companies? They are the people that pay up front for the energy they have not used and people who pay their bills very quickly suffer more and they pay more for energy. What can we do about it? It is absolutely wrong.
Q51 Chairman: Can I just endorse what Mr Hoyle has just said; it is not just prepayment customers; it is the standard credit customers too. Most fuel poverty is among standard credit customers and their needs I do not think always get enough attention in public debate.
Lord Whitty: You are absolutely right. One of the things we have been deeply critical of Ofgem about and until this report came out Ofgem did not accept is that prepayment meter customers and standard credit customers are not dealt with seriously by the market and do not benefit from the degree of competition that exists in the market at the moment. Whilst there are bits of the Ofgem report which we would seriously query and we think the headline report is complacent, there are bits of that report we can now take back to Ofgem and say, "What are you doing about it?", and that applies to those people who are heavily concentrated in low income groups, for various reasons, as to why they are effectively discriminated against in terms of the way in which they pay. That must one of our priorities both on our fuel poverty campaign and our general approach to fair tariffs.
Q52 Mr Hoyle: So when do you think we are going to get an answer because this campaign has been running for a long time, both on prepayment and standard credit customers? What timescale do you envisage action being taken in?
Lord Whitty: I think it is not likely, and this is the Ofgem timescale and they do have to consult, et cetera, but this winter is going to see significant changes in the PPM. I think there will be some and hopefully we will see some companies change their systems where they are breaking ranks, and once that happens ahead of Ofgem intervening that will lead to other companies following, but we also need more in relation to this winter than we have argued. The term "social tariff" should be absolutely enforced by Ofgem this winter so that the offer which each company makes to people who are in the more vulnerable groups should genuinely be the lowest charge for that household in those circumstances, and that should apply right across the board. The things which are labelled social tariffs now have different names, they are very confusing, nobody understands them, Ofgem do not enforce it effectively, so for this winter, ahead of a total rationalisation in favour of the fuel poor and against discrimination by dint of how you pay, we need to see genuine social tariffs in force.
Mr Mayo: Ofgem are in a consultation period. They are running an eight-week consultation period, which is probably welcome but actually it is a licence change, so if a company said, "We accept that we have got it wrong. We have been overcharging people on the basis of how they pay", which is not what we want the market to compete on, "and for the lack of a competitive process they are probably paying too much because it is an inefficient process anyway", and if the licence holders agreed then Ofgem could bring forward a change on that basis, price controls essentially on payment method, in advance of that eight weeks. It will be interesting to see, and you as a select committee might have as much influence as anybody on this, whether that could be brought forward.
Chairman: We have Ofgem coming before us on 24 November and the Minister on 25 November before we lose responsibility for this policy at the end of the calendar year.
Q53 Mr Hoyle: All being well, the industry might find some morals and do it before any of us have to put the real pressure on, so that is something I hope they are listening to as well. The other thing, of course, is what are the implications for the retail markets of the demise of Bizz Energy and Electricity4Business, so two main independent retailers out of the market and we are back down to what I can only describe as the limited few that act against the consumer?
Mr Mayo: It is a consolidation of the market. It has been good that the emergency mechanisms seem to have worked in both cases. There is a possibility that both cases also raise questions about the financing of infrastructure for the energy market looking forward given the credit crunch. There are two sides to it, one of which is a further consolidation of the market and a reduction in wholesale market liquidity as well with the takeover of British Energy, so things are going the wrong way on that basis, but also I think there are these other bigger questions looking forward in terms of the investment that we need in energy infrastructure, how that is going to be paid for, and who pays for that as well.
Hoyle: One of my other worries that the Committee has
had brought to its attention, and I do not know what role you can have in it,
is the fact that there is a lack of storage capacity in the
Mr Mayo: The big investment that is
going to be needed, including in storage capacity, raises very big questions
about how it is paid for and is it paid for by consumers, is it paid by
taxpayers? Are those costs fair? To what extent can this be delivered by the
market? To what extent do we need more
regulated solutions? Those are very big
public policy questions and we will need to have an input on moving
forward. I think the crunch issue for
the UK, having liberalised and privatised the market at a relatively early
stage - and we have been critical of the market in our comments today - you
then get caught in the fact that other European countries still retain
relatively protectionist systems so that, exactly as you say, the gas runs one
way in the pipelines but not both ways in regard to that. I think that is a big question as to whether
the European market can effectively be liberalised on a reasonable timeline
that can give energy security to consumers and the public here as well, or
Mr Hoyle: But the fact is that they are
always then putting their money back into investments but, as we know, not only
have the salaries of chief executives substantially increased but the share
dividend went up to £1.62 billion, which shows that we are not seeing the
investment. The fact is that our storage
capacity is 9-11 days compared to over 100 days on the continent and that is
where the real difficulty lies, is it not?
We are always buying at the spike but the spike is being supplied by
storage capacity in
Q55 Chairman: Can I say on the subject of electricity independent suppliers, Bizz Energy you will know, I am sure, was in my constituency. A hundred and sixty jobs have gone which is very painful. They were planning to expand the domestic sector; that was the next expectation, but with the small business sector. That now will not happen and I do not see why anyone in their right mind should get into independent electricity supply. This Committee and the company have been warning for years about the issues here of procuring electricity, the way in which the big six discuss the base, using the independents as a negotiating ploy, basically. It is a scandalous business, and now two companies have paid the price in a couple of weeks. This is a very important issue for your organisation. If it is just the big six and no prospect of new entrants then competition is dead.
Lord Whitty: Absolutely. The definition of success on the competitive front which the regulator and the Government and others in the industry have pointed to is not the structure of the industry; it is the number of switches. We welcome a large number of switches, although the figures need analysing, but the structure of the industry is such that it is still not a competitive industry and, as you say, in recent weeks it has become less so. We thought competition was about bringing in new suppliers and having genuine competition for every user of energy, and that has not been the case either for business or for the household.
Q56 Mr Weir: I saw one brief glint of light in Lord Whitty's original answer when he mentioned off-gas grid customers. I represent a rural area and am greatly concerned about those who use home fuel oil for heating, and it is something the Committee brought up in its report into the market. One of the things that concerned us was that nobody seemed to have any responsibility in this market. Do I take it from your answer that you accept you have a responsibility in this market and will be including that in your investigation into energy prices for all suppliers?
Lord Whitty: The answer to that is we certainly have it within our remit and we will be looking at all disadvantage in the supply of energy. The problem with Ofgem's remit is that effectively it only covered the market that had been privatised; that is their origin, and Energywatch's remit mirrored that. It did not therefore cover people who were outside the grid supply. It did not cover people off the gas network. It did not cover solid and oil fuels. It did not cover, for example, district heating. For all those reasons those consumers need protecting and have not hitherto been protected. We would regard it as part of our remit to look at that and since we have a particular responsibility for rural consumers where this is most concentrated, not exclusively but most concentrated, that will be a big issue in the energy market in rural areas.
Mr Weir: I am delighted to hear that answer.
Q57 Mr Bailey: Before I turn to postal services may I supplement the questions on this particular area? You have drawn together a number of issues which have been touched upon, first of all the Bizz Energy and Electricity4Business demise. Given the fact that Ofgem are supposed to protect competition in the area, if that is not a contradiction in terms, to a certain extent they must be seen as a symptom of the failure of Ofgem to do that. Can I also pick up a comment that was made by Ed? You said you were joining with the Daily Mirror in a consumer campaign on this. I am all in favour of that. I see nothing to lose whatsoever in it and it is good potential publicity for yourselves, but, given the fact that there has already been strong consumer reaction to these prices, what sort of added value do you think you can bring to that? My last comment is, you have already approached the European Commission; good. I know Energywatch did a lot of research which provided evidence for this Committee. Presumably you are drawing on that. What capacity have you to bring to the submissions that in effect Ofgem have not done?
Mr Mayo: In terms of the Daily Mirror, and I hasten to add that we work with a lot of other media outlets as well, in addition to some of the comments that we made earlier about the campaigning side, there is also an opportunity to try and reward a company that does break ranks. We are not going to deliver flowers to the headquarters but we will praise those that break ranks. We will make sure that they are top of the switching list. Our message is, "Consumers will reward you for doing the right thing". We have got to try and build not just public pressure but also understand the business drivers for companies to do this. As time goes by, if companies hold out against energy price cuts and they do that again as a herd, then it is absolutely essential that companies explain their position, that if they are not going to bring down prices they are absolutely clear as to why that is, and I do not believe we have had those kinds of explanations or that clarity as yet. Do we have the capacity in terms of doing the work on submissions and tracing this? This is one of the top priorities for us as an organisation and we do have some of the core analytical team that was at the heart of Energywatch in terms of taking this forward, so I have a very strong set of colleagues. We are recruiting, we are finding our feet. This is top of the list for us and we will be making an active input into this, and indeed I met with Ofgem yesterday and we are meeting again on some of the issues exactly around the probe.
Q58 Mr Bailey: Can I move on now to post office closures? You outlined that one of the projects to be undertaken is to scrutinise the final closure proposals in the current post office closure programme under the time limited branding of Postwatch, so effectively you are carrying on the work that Postwatch was doing. Having looked at the reasons for the closure of one post office in my particular constituency, it was outlined that there was in effect - I will not call it an appeal process because that will be done but it could be reconsidered by Postwatch in the future. Realistically, what difference will your assessment of the post office closure programme make to some of the controversial decisions that are happening day by day on the ground?
Mr Mayo: Postwatch, I think, had been put into a tough position in the sense that if one post office was reprieved then another one would be brought into its place, which is a bit of a tough call. I think some of the very good work that Postwatch has done, and we have had a very good team working on this and are still working on this, led by Howard Webber, has been work behind the scenes in the early work, developing the access criteria and then applying those. That is some way upstream from the point that you are raising around adjudications. Therefore, I think Postwatch has been in a tough situation. It has done a good and objective job for consumers but I think it would be important to step back after this programme has finished and look at the lessons that are there in terms of how this operation has run, and I have no doubt there are lessons for Post Office Ltd as well as for our own operation moving forward. We do not want to see further rounds of closures but it is important that we learn from the up sides and down sides of the approach that we have taken.
Q59 Mr Bailey: I understand from local councillors who attended a meeting between councillors and Post Office Ltd and Postwatch that basically Postwatch's role was that of a noddy dog. It did not really add anything or contradict anything that the Post Office was saying.
Mr Mayo: It does occasionally bite their heels, and I think that is fair.
Q60 Mr Bailey: I do not want to put words into your mouth, but if I could summarise, you would not be, if you like, a second tier of appeal. You would just assess what has gone for somewhat indefinable future reference.
Lord Whitty: There are three different issues here. One is that this round of closures has not yet finished and there are some escalations, as we call them, rather than appeals which are still to be heard and that is being dealt with by the former Postwatch board members and Postwatch staff and will run through to early new year. There is then the issue which I think you were really alluding to, which is, where the Post Office has made commitments on the alternative arrangements where there have been closures, what is the monitoring process for ensuring those are being delivered, and on that we do have a responsibility and it is in our work programme to continue to look at that. We also have a very clear, statutory explicit and individual role in the Act setting us up for the Post Office network as a whole, and were there to be, either directly or indirectly, another significant tranche of post office closures presented we would have to negotiate as to what our role would be. What I think Ed was saying, and I know what I feel, was that Postwatch, despite the criticism, did the best job they could in the circumstances but they were put in the position of saying, "If you put up an argument against that post office going we have to have another one down the road go". That is not a situation we would want the new organisation to go into. I think if we were looking at the totality of the post office network then we would need to look at a much wider role for the post offices in a much wider context of what public services and other services are needed area by area. One of the problems of the past two tranches of post office closures is that it is as if they had been looked at through a narrow prism of post office economics and a few criteria like access, which are important, but the reality is that the communities which have been most hit by post office closures are those where other services have also been disappearing in the less prosperous suburbs and in rural areas. There the post office is only one part of their lack of access to service and I would want any further review of the post office network to look at it in that wider context, and the role we would play in that would relate to that wider context.
Q61 Mr Wright: Just on this particular point, you said you would be reviewing the results of the post office closure programme. In my area they closed two post offices very close to the main post office which has resulted in that main post office having a queue 45 minutes to an hour long, which in my opinion was a completely wrong decision, is against the consumer's interest and will probably push more people away from the post office. Would you be looking at that type of thing?
Lord Whitty: We have been looking at it in general. We are required to look at it in general, and particular examples will be helpful, so members of the Committee and others may be feeding in information. Obviously, these new arrangements have not in all cases yet been established and within our work programme we are looking at it in general. We will not necessarily do it in the same way as Postwatch, partly because we will not have a regional structure and partly because we are moving into a new era of post offices where, formally speaking, the Government have effectively indicated that they are not looking for a new big tranche of closures and the Opposition have said likewise, so I am working on the assumption that the present network ought to be preserved. Obviously, issues like the post office card account may alter that, but if the current network is to be preserved then we want to look at how effectively it is operating both in terms of the alternative arrangements which were made as commitments as a result of the last round and more generally.
Q62 Mr Bailey: I was about to say the elephant in the room, of course, is the POCA decision and, depending on how that goes, you could in certain circumstances have a pretty heavy remit in the very near future.
Lord Whitty: We do. We endorse what you have said about the process of the post office card account, that effectively there is no serious consultation or assessing of the experience of POCA card holders and potential POCA card holders. There is to be no examination now of how the scope of the POCA card could be increased and I therefore think DWP's conduct of this contract is deeply flawed. I take heart from the letter from Lord Mandelson, which is in the papers today, which indicates that he has a vision for the Post Office which is somewhat broader than a narrow look at the post office card account and that contract, so I am hoping that is a positive indication that these wider issues will be taken into account before any decision is taken to move that away from the post office. I am hopeful that the Government are now addressing these wider issues.
Q63 Mr Bailey: Just finally, changing the subject slightly, why are you exploring "the scope for a Community Services Advisory Group to take forward the successful work of Postwatch Counters Advisory Group"? The obvious question is, if Postwatch's Counters Advisory Group was successful why was it not just transferred to Consumer Focus?
Mr Mayo: The Counters Advisory Group has been a very effective way of getting the different stakeholders together around the Post Office Counters network, and all we want to do is widen that out so that we can look at community services more widely. Postwatch was never able to look at that; the focus and the agenda had to be purely on post offices rather than this potential wider role that Larry has described. That is the shift. As it happens, when we have talked to people in the Counters Advisory Group they probably rather like the name so it may well be that we keep the same name. That is important to us. I think we have got a role in connecting through with a wide range of stakeholders who have got an interest in the services that are provided to consumers and communities, and that is one part of our forward work programme.
Chairman: I just want to make the point, and I used my position as Chairman in the introduction to make this point, that there is no doubt the transition did have its casualties in the last round of the post office closures. In my own constituency I am quite clear we were unable to make the case as effectively as we might have done because the staff has altered so Postwatch were unable to attend the public meeting to discuss the closure of Bengeworth post office because they could not produce someone in time, so matters of fact remained in dispute about the post office closures, matters of fact which should have been resolved. Partly this Committee was concerned that the six-week period for consultation, as I always said, was too brief and my own constituency proved it to be the case. Having said that, we are where we are and that is past history but it was an unhappy period and I fear that if the card account does not go to the right place you will have to face it all over again, so good luck.
Q64 Mr Wright: Just turning to the Consumer Law Review, the Government has been looking at this particular question since 2004. What does Consumer Focus want to get out of the Consumer Law Review?
Mr Mayo: The Consumer Law Review is a
great opportunity to modernise and spread consumer protection and consumer
rights and to harness the power of consumers for more competitive markets. I think if things are good for consumers then
they are good for the economy by and large.
One example of this, an example of an area that we would press on, is
access to redress because this is an area of relative weakness, if you like, in
Q65 Mr Wright: Two of the areas that they are looking at are whether or not to have a principle based approach or whether it is going to be a prescriptive based approach, and quite clearly it seems to be veering towards the principle based approach. Will that create any difficulties for the various consumer advice organisations, do you think?
Mr Mayo: I think there is a transition issue there as people get to understand the new approach and try to make that work. I think there has been some very effective work done within the narrow constituency of trading standards and BERR and some quite good involvement of the different stakeholders - the Advertising Standards Authority or the CBI and the like. That is very welcome. What there has not been is a wider public awareness. People do not know that this new right is there for them to be treated fairly, or rather not treated unfairly, so there is wider work to do there. On the question around the principle based versus prescriptive based approach, I think we are seeing that the principle based approach opens up new opportunities for dealing with new scams that emerge that were loopholes, such as the Timeshare Directive, that whole saga of protection and legislation and trying to catch up with the latest problems and scams that have been emerging. The principle based approach is more future-proof in that way, which is very welcome, but, just as there is a debate around the limits of a principle based approach in the financial services market and the future of regulation, I think we need to take the same look in terms of the consumer field. There is a lot of merit in a principle based approach but only and primarily if people know that that is the principle that applies and that is what their rights are and I think that is a gap in the current arrangements.
Q66 Mr Wright: In terms of the EU, they are now looking at the possibility of a new directive in terms of consumer rights and presumably you will be advising the Government on that particular area, but quite clearly, for example, at the present time if a consumer has a faulty good they can take it back and get the money back in the UK whereas perhaps in the future it may well be the case that the goods that are taken back will be replaced or repaired and given back, so the UK consumer may well lose an element of strength that they currently have. How would you see that in terms of your advice to the Government?
Lord Whitty: Our view of the EU level has
been that we were in favour of the Unfair Commercial Practices Directive, which
was a principle based piece of legislation and we would be in favour of
principle based legislation in general.
However, we are not in favour of maximal European legislation. In other words, if the European legislation
harmonised, ie, made uniform, the rights so that there was no ability for the
individual state to take it further, either in the case of pre-existing
legislation, which is the kind that you are talking about in terms of money
back, or in the future, then we would not be in favour of it. There is a big argument going on in
Q67 Mr Wright: So what you want there is for the standards to come up to our level rather than for us to go down across the board?
Lord Whitty: Ideally, yes.
Q68 Mr Wright: There is another area in terms of the rights of small businesses as consumers who get products from larger organisations, such as with unfair contracts, and one of the areas that we are going to be looking at is the question of the pubs. Clearly there are some smaller organisations that have contracts with larger organisations in the pub industry and we will be examining that. Do you think that this should be within your remit?
Lord Whitty: Normally business-to-business relations are not within our remit. It is a question of whether the business's contractual position is similar to that and it is going back to the question of small businesses with Energywatch. Generally speaking, business-to-business would not be our concern.
Q69 Mr Wright: What we would be talking about in this particular case is one individual having a contract with a larger organisation. Although that would be regarded as a business, they themselves would be a consumer dealing with other consumers but also probably in many circumstances tied to a contract which might well be seen to be unfair in an open market.
Lord Whitty: I am personally strongly against that and we are trying to break that down in terms of the supermarkets and the food chain, but I do not think that is central to our business except insofar as it affects and limits the choice of individual consumers, as in many cases it might. Ed may take a wider view but my instinct is to say that supply chain issues are not primarily our concern except insofar as they have a knock-on effect.
Q70 Mr Binley: I think there is a real impact upon the consumer, Lord Whitty, in the way that you talked about post offices in suburbs and rural areas because bigger companies now demand a shorter payment time for goods. They go to their bank and their bankers are being really quite ungenerous in their response in many respects. I met with the retail small shops organisation yesterday and they brought this point particularly to me because they are fearful that many of their smaller retailers will go to the wall and that will impact upon consumers sizeably, particularly in rural areas. Can you not take it on in that respect because we need some urgent action?
Lord Whitty: That in a sense is what I was saying. If it does have that effect or it has the potential for that effect then it is our concern. What we would not do is intervene in an issue which was solely a question between a supplier and a customer. However, I would say that I do believe the competition authorities, the OFT and the Competition Commission, should take the monopsony/oligopsony dimension of their responsibilities rather more seriously than has until very recently been the case, and I just cite the food chain as being one such area. It is not primarily for us to trigger it but I do think that that kind of imbalance of power does need to be addressed in the system.
Mr Binley: I am grateful for that; thank you.
Q71 Chairman: Monopsony and oligopsony are not words you often hear in Parliament.
Lord Whitty: You got both in one sentence there.
Q72 Chairman: I am impressed. You were not playing a game with your Chief Executive to try and get them on the record, were you? I have just one last area of questioning briefly before we let you get you unless there are things you want to say to us we have not covered. Trading standards is another whole area of consumer redress, consumer law enforcement, which we have not talked about. You mentioned it briefly in answer to one question. How will you interact with trading standards departments?
Lord Whitty: We have a very positive relationship with the Trading Standards Institute and in some cases with individual trading standards departments and we will need to build on that both in relation to enforcement of the law and in relation to general consumer information. We will want as part of our intelligence gathering to build on what trading standards departments would say. I should say that we think trading standards generally speaking do a very good job. We are concerned at issues that trading standards people may well be bringing to you themselves about the resourcing and the priority given by OFT and the Government to ensuring that trading standards are up to the job.
Q73 Chairman: The lack of priority, do you mean?
Lord Whitty: I put it neutrally but their view will be lack of priority, yes. If that is indeed the case that is something which needs to be addressed because you can have as many consumer rights as you like in the world but if you cannot enforce them, either through the courts or through trading standards, then they are not worth the paper they are written on, so our concern is that trading standards need to be an effective force as well as a partner in various things that we are doing.
Q74 Chairman: So you think the model is basically not broken? The distinction between the Worker Consumer Directive and trading standards, which I think I understand, is a valid one. The local delivery of trading standards is a valid approach but there may be issues around the resources available to do it?
Lord Whitty: Yes, there are issues about the structure of it and whether there should be regional provision, but essentially that is a resource issue and the new organisation does not have a view as to whether they should continue to be local authority based or regionally based. That is a continuing argument, but my concern is that there are adequate resources deployed locally and any threat to that would be of concern to us.
Q75 Chairman: Often the sharpest and hardest consumer issues are ones that trading standards departments have to address. Consumer safety, for example, is an essential part of the consumer's rights.
Lord Whitty: Absolutely.
Q76 Chairman: Trading standards departments always measure things. They do weights and measures as well. In moving to a principle based system would that pose particular challenges for changing the mindset of officers in the trading standards departments?
Lord Whitty: I think that is part of the change that Ed was referring to. The old FCC did some useful work on weights and measures. It is just the case that most consumers did not understand either that they existed or that they were of use to them. Principle based legislation properly enforced by trading standards would not necessarily mean the whole range of minutiae of weights and measures would continue to exist in that form. It does require both consumer information to be adequate and trading standards officers to be able to enforce and be trained and directed to resource principle based legislation in that field.
Q77 Mr Binley: Trading standards operated by local authorities are massively under cash pressure. Are you keeping an eye on whether trading standards is not suffering as a result of that especially and whether we are maintaining at local level that resource that is so vital to consumers?
Lord Whitty: That was the reason for my earlier comments.
Q78 Mr Binley: I thought so.
Lord Whitty: There are no very up-to-date figures but the feedback from some trading standards operations is that their areas are being squeezed, for one reason or another, so we will continue to keep a close eye on that and raise it with Government.
Q79 Chairman: There was a note of urgency in your voice as you said that and I was slightly concerned by that because trading standards work is tremendously important. It may well be this Committee should take some views from representatives of the trading standards sector and see what they feel about all this.
Lord Whitty: I think that would be sensible.
Q80 Chairman: You think that would be helpful?
Lord Whitty: Yes.
Q81 Chairman: Thank you very much. Is there anything else you wanted to say that we have not covered in nearly two hours' questioning?
Mr Mayo: Just to say that we do look forward to working with the Committee in future. We will be very pleased to bring you areas of work and research that we are doing. We are working, for example, at the moment looking at the relative performance of regulators in relation to consumer interests, and on that or on other possible topics for your consideration we would be very pleased to input and support you in your work as well.
Chairman: Thank you very much indeed. We look forward to an ongoing relationship.