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Public Bodies (Abolition of the National Consumer Council and Transfer of the Office of Fair Trading’s Functions in relation to Estate Agents etc) Order 2014

My Lords, this has been an interesting debate, and I thank all noble Lords for their contributions. Just before I go into the detail of the debate, I want to cover a couple of points. First, the noble Lord, Lord Harris, asked recently about the review of the Estate Agents Act. At present, we have no plans to review the Act. However, my colleague in the other place, Jenny Willott, has written to ask the ombudsman to review the issue of double-charging, which I agree is a worrying trend.

Secondly, I thank my noble friend Lady Oppenheim-Barnes for her general support for what we are doing in the Consumer Rights Bill. I very much welcome her support for the Government’s measures to modernise consumer law, which will make a major difference on behalf of consumers and has been widely supported.

I now return to this particular order. The Government believe that the changes introduced by the order will deliver more effective consumer advocacy and more joined-up supervision of the estate agency regime. Noble Lords have raised a number of points and I will seek to address these in a few moments.

The noble Baroness, Lady Hayter, stated that the measures that we are proposing lack coherence and fail to provide a single voice to protect consumers. I challenge that assertion. The consumer journey will not change significantly under the new arrangements.

We are simply joining up the policy-making and regulatory oversight expertise of Consumer Futures with the existing consumer complaint handling abilities of Citizens Advice services. The changes do not mean additional burdens for local bureaux, as information on cases that they deal with is already collated centrally to inform Citizens Advice campaigns and reports. As a result of these changes, anyone needing impartial help or advice on a consumer issue will be able to phone the national helpline, contact their local bureau or use the interactive help on the Citizens Advice web pages.

The noble Baroness, Lady Hayter, and the noble Lord, Lord Whitty, suggested that we are simply abolishing quangos. Again, I challenge that assertion, as I did at the beginning of the debate. This is not simply about making a reduction in public bodies. Bringing together the in-depth knowledge of the regulated energy and postal service sectors with the wealth of intelligence on consumer problems available to Citizens Advice will bring coherence to public policy-making. For the first time, the consumer advocate will have detailed knowledge and understanding of the challenges facing real consumers across the country when campaigning to influence new regulation and policy development.

During the debate in Committee last week, the noble Lord, Lord Whitty, bemoaned the fact that a number of consumer bodies remained outside the scope of these changes. I reiterate that this is not about rearranging the deck-chairs for the sake of it. This is about achieving real benefits for society, by enabling consumer advocates to effectively influence energy policy, transport policy, telecommunications policy, financial policy and general consumer matters. Citizens Advice will collaborate with consumer representatives in the other regulated sectors to ensure that best practice is shared and that regulatory developments in the other sectors reflect insights from the experiences of people on the street. Trading standards officers already take enforcement action against local estate agents. Changes brought about by this order support the flow of information from local to national enforcement, bringing further coherence to enforcement in this sector.

The noble Baroness, Lady Hayter, implied criticism of the Government for failing to harmonise redress for estate agents with redress for letting agents through this order. I will say more about this in a moment, but such harmonisation was not an objective of this order and the estate agent and letting agent sectors have very different characteristics.

When the Enterprise and Regulatory Reform Act was debated in Parliament, the noble Baroness proposed an amendment that called for letting agents to be regulated in the same way as estate agents, much as she described in her speech today. This amendment was rejected by the Government on the grounds that overregulation reduces supply, which in turn reduces choices for tenants and could lead to rent increases. However, the Government recognised the value of introducing a mandatory redress scheme, and this part of the noble Baroness’s amendment is now part of the Act.

The Government have taken a consistent approach. The process to establish and approve the new redress schemes for letting agents will mirror that for the

existing estate agency schemes. This follows discussions between BIS and OFT officials, with colleagues in the DCLG, to help them take account of the lessons learnt from regulating the estate agency market; such points have been made by noble Lords in today’s debate. The Secretary of State for Communities and Local Government will be responsible for approval and oversight of redress schemes for letting agents, reflecting his department’s responsibility for this sector. Oversight of the estate agency schemes, and approval for any future schemes, will reside with Powys, reflecting the extensive role of trading standards in the broader regulation of this sector.

Before I address some of the questions raised, particularly those of the noble Baroness, Lady Hayter, I will say that it is very good to have an endorsement of Powys by the noble Lord, Lord Berkeley. It was also particularly helpful to have an explanation of the changes and of the selection of Powys by the noble Lord, Lord Harris.

The noble Baroness, Lady Hayter, raised the issue of the line of accountability for Powys County Council and stated that it was convoluted and unclear. This is simply not true. Ultimately, Powys County Council will be accountable to BIS. Powys will report to the NTSB in its role as co-ordinator, and the NTSB will be accountable to BIS for the performance of its enforcement teams and projects, including estate agency work. For the avoidance of doubt, Powys-elected representatives will have no part in running the new estate agency functions—a point raised notably outside this House.

The noble Baroness raised the issue of the role of Anglesey and stated that the Government have still not made clear what the role of Anglesey is. Both the Consumer Affairs Minister, the Member for Cardiff Central, and I have made it clear that it is Powys County Council that will take on sole responsibility for delivering these estate agent functions. It is true that the original bid submitted by Powys County Council proposed that some of the work be carried out in partnership with Anglesey. However, during the development of the transition bid, as circumstances changed, a decision was taken to deliver all the necessary functions from within Powys County Council.

To avoid any potential conflicts of interest between its statutory responsibilities as the lead enforcement authority and local enforcement cases, Powys County Council has decided to second an official from Anglesey County Council to manage matters that relate to estate agents which operate within Powys County Council’s area. This officer will also investigate national cases under the Estate Agents Act, but will act under the authority of Powys County Council. The OFT currently operates a similar Chinese wall between its enforcement and investigative activities. If it is some reassurance to the noble Baroness, we will show the paperwork associated with Powys’s bid in due course, as promised by my colleague in the other place, Jenny Willott, in her letter to Stella Creasy today.

The noble Baroness also raised the issue of the delay in providing a response to the request from Stella Creasy on the FOI request for the paperwork on the Powys bid. I will clarify that her letter was received on Thursday night, requesting a significant amount of

additional information. We issued a response to all the issues that she raised earlier today. We will provide the paperwork requested in accordance with the Freedom of Information Act 2000.

The noble Lord, Lord Borrie, asked why the estate agent powers passed to Powys. Currently, both trading standards and the OFT possess enforcement powers under the Estate Agents Act 1979. Transferring the OFT’s powers to trading standards will simplify the landscape by giving sole responsibility to trading standards. This is very much in line with the Government’s intention that trading standards be responsible for the co-ordination of national consumer enforcement. Under the oversight of the National Trading Standards Board, a lead local authority will utilise the network of national, regional and local intelligence provided by trading standards services to carry out this function. As I have said, there is a previous precedent for a local authority to discharge functions on behalf of a nation, as alluded to by the noble Lord, Lord Harris. For example, the illegal money lending teams for England, Scotland and Wales of the NTSB and Trading Standards Scotland are hosted by single local authorities.

The National Trading Standards Board ran a tender exercise in the summer of 2013, as the noble Lord, Lord Harris, has said, to appoint a lead enforcement authority to host the National Trading Standards Estate Agency Team. Each bidder was required to demonstrate how it would satisfy a number of criteria. As has been said, six applications were received in total, and these were reviewed by a panel of senior trading standards officers, supported by officials from BIS, the NTSB and the OFT. Each bidder was required to demonstrate how they would discharge the functions under the 1979 Act, and through careful analysis of bids, the panel was able to assess that Powys County Council was the authority best placed to provide the most efficient and effective management of the function. I hope that this extra information, on top of what I said earlier, gives some further reassurance to this House.

The noble Baroness, Lady Hayter, asked very clearly why Powys was not appraising letting schemes. I will reiterate that the lettings and property management work redress scheme under the Enterprise and Regulatory Reform Act 2013 is new, and only concerned with mandatory redress, as the DCLG has responsibility for letting and property management agents within government. It was decided that it would be best placed to manage the relatively straightforward redress scheme appraisal process. There is a distinct difference there.

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The noble Baroness, Lady Hayter, raised the issue of some of the OFT’s functions, which she stated did not sit well with the Competition Commission responsibilities in the CMA. We agree that some of the functions of the OFT sit better with other organisations. That is precisely why we are moving responsibility for the redress scheme to trading standards so that the CMA can focus more on market-wide issues to benefit consumers and bring a closer link between front-line trading standards expertise and the estate agency redress scheme.

The noble Baroness also asked why Powys was responsible for regulating all estate agents. These functions are just two of a number of measures that the Government have in place to protect consumers from rogue estate agents. A wide range of formal actions can be taken against rogue estate agents under both sector-specific and general law. The noble Lord, Lord Harris, alluded to this.

The noble Baroness also asked whether statutory bodies should have consumer panels or consumer representatives. We completely agree that the organisations in the consumer landscape should take full account of the perspectives of consumers. We believe that this is best achieved, however, through open consultations and engagement, such as the CMA’s recent consultation on its business plan and the consultation by Consumer Futures on its work plan, rather than specifying the need for one person who represents consumers. The whole organisation should think about the needs of the consumer.

The noble Baroness had concerns about vulnerable consumers, and I agree that she raised a fair point. The Citizens Advice service also has substantial experience of addressing the needs of vulnerable people across a wide range of subject areas in which I am sure the noble Baroness will be well versed. We are confident that it will be able to deliver outcomes with no loss in quality. While Consumer Futures currently assists around 7,000 customers directly, the Citizens Advice service is advising and supporting millions of individuals.

The noble Baroness asked about measurements—in other words: how will we know that these arrangements are working? The bodies have well established grant funding relationships with BIS and are already fully accountable for the use of BIS funding and levy funding through conditions placed in their annual grant letters. Grant terms will be expanded to set out the requirements and key performance indicators relating to these new activities. Performance will continue to be closely monitored by BIS to ensure that the successor bodies are delivering good outcomes for consumers and achieving good value for money for levy funders and taxpayers. I should reiterate that these arrangements mirror those for the NCC.

The noble Baroness asked a question along the lines of: is Citizens Advice now a public body? We are confident that Citizens Advice remains a charity, and although we have recently been discussing its classification with the Office for National Statistics, the Government remain confident in their belief that Citizens Advice should remain outside the public bodies framework. I hope that that is some reassurance.

The noble Baroness also asked why the letting and management redress scheme rests in England only. She may be aware that housing is a devolved issue. It is up to the devolved Administrations to introduce the protections that are important to them and reflect their differing priorities and different housing markets. She also asked why the letting and management redress schemes simply use the estate agent scheme. It is important that the approval and redress schemes for letting agents involve a fair and transparent process. I should reiterate that simply extending

the estate agent schemes to include letting agents would unfairly restrict any new provider from coming forward.

The noble Baroness asked whether Citizens Advice would play a role in Europe. Indeed, it will play a full role in Europe, working with other EU bodies to promote consumer welfare and combining the NCC’s experience with Citizens Advice’s knowledge of consumers on the ground. The CMA will continue to lead the UK regulators’ engagement by working with the NTSB to feed in the experiences of trading standards and its enhanced role in the new landscape.

The noble Lord, Lord Borrie, basically stated that the Government have not explained who will do the work of Consumer Futures. The majority of staff from Consumer Focus and the NCC will transfer into Citizens Advice. This includes the director, who will fulfil his role in Citizens Advice as well as most of the expert staff. We recognise the importance of ensuring that there is sufficient capability and capacity for this important work, and firmly believe that our plans will achieve this.

The noble Lord, Lord Whitty, raised the issue of local trading standards being inadequately resourced to take on new functions. The baseline cost of policing the UK estate agency market will transfer from the OFT into the NTSB’s enforcement grant. This amount will be ring-fenced from the main portion of the grant in order to ensure that the full funding will be used for the purpose intended.

The noble Lord also raised the issues of the lack of staff transferring to Citizens Advice and the trimming of resources. I hope that I can give him some reassurance that the vast majority of policy staff will transfer to Citizens Advice. Next year’s levy-funded budget will be the same as this year’s. The noble Lord stated that funding for general advocacy has been cut. Budgets have been squeezed since 2008 in the light of pressure on the public finances, but we are confident that efficiencies created by this transfer will enable Citizens Advice to step into this role.