HC Deb 17 May 1973 vol 856 cc1774-88
Mr. David Reed (Sedgfield)

I beg to move Amendment No. 37, in page 16, line 31, at end add: '(5) The Secretary of State may, in addition, lay before Parliament such orders in respect of consumer trade practices which he considers require urgent control irrespective of any report from the Advisory Committee'. My purpose in drafting the amendment was to ensure that, together with the proposed amendment to new Clause 3 which was debated yesterday, the Minister for Trade and Consumer Affairs would have an effective armoury to deal with market-oriented trade abuses. I had particularly in mind pyramid selling. The initial idea was that if the market-oriented abuses became a consumer trade practice, under the terms of the amendment the Minister would be empowered to bring orders to the House to deal with them without having to go through the machinery of the Director General or the advisory committee.

Following his statement yesterday, I accept that eventually the right hon. and learned Gentleman will deal with this whole question of pyramid selling and market-oriented abuses. It is a pity that the right hon. and learned Gentleman is not present, because yesterday he teased me about some delay in sending him a report on pyramid selling. Had the right hon. and learned Gentleman been here —perhaps his hon. Friend will convey this to him—I should have apologised for the delay and explained that it was due to the amount of time that it took the Department of Trade and Industry to decide that pyramid selling was an abuse and that people should be warned about it. The difficulty was that several of my hon. Friends and myself were so busy trying to warn the public about the dangers that our efforts to get the necessary legislation introduced were held up. Apart from that, I accept that the right hon. and learned Gentleman intends to introduce measures to deal with this kind of trade abuse. I hope that when the measures arrive they will be good, because they will need to be good to deal with the situation.

The difficulty about legislating for this kind of practice is that we are not dealing with a static situation in which there is some kind of abuse that can be recognised and dealt with. We are dealing with a fluid situation. The people concerned are rogues looking for ways in which to get round the law. They are sophisticated rogues, and we need a sophisticated response to deal with them. I do not want during this debate to deal with pyramid selling as such, but it provides a good example to illustrate the kind of measures that will eventually be needed to deal with market-oriented trade abuses.

6.45 p.m.

On 29th March this year the Minister for Trade and Consumer Affairs introduced his consultative document on pyramid selling. The idea was that everybody with an interest in the subject should express a point of view upon it. That was about six weeks ago. In that document the Minister was as scathing as he could be about many of the activities to which I referred yesterday. I accept the right hon. and learned Gentleman's good intentions in that document, but all it has done for the moment is to encourage many people to regard it as a statement of Government intention and then to try to find ways round it.

Within the last seven days two new pyramid companies have begun operations. Just before the debate yesterday I received a telephone call from a gentleman who began by saying "I want to put £600 into ladies' brassieres. What is your advice?". All sorts of images went through my mind about what he wanted to do with the £600, but it eventually emerged that a new company selling that article on a pyramid structure basis had come into operation and he was being invited to invest in it.

I asked for details of the firm, and he sent me a copy of the code of ethics which distributors in the firm are being given. It very nicely gets round the kind of provisions suggested in the Minister's consultative document. One of the key points was that people who invested in this kind of thing should get their money from retail sales and not from any form of recruitment bonus.

From the code of ethics of the firm— which, incidentally, is called Memory World (UK) Ltd.—comes the following sentence: In consideration for training, helping and supervising an executive distributor in his or her organisation to such an extent that that distributor also becomes a marketing controller he will receive a payment monthly in perpetuity which is in direct proportion to the value of purchases made during the new distributorship so formed. That means that six weeks after the consultative document was issued a company has produced a new formula on a pyramid selling basis which will enable it to get round the proposals in that document. I put this forward not particularly as an example of pyramid selling but in order to demonstrate the need for flexible controls to deal with this kind of abuse.

An excellent example of what can be done is provided by a Private Member's Bill, a short one with a long title, which some of my hon. Friends and I introduced last year. It was called the Trading Representations (Disabled Persons) Amendment Bill, and it is now an Act. Its object was to prevent another kind of abuse, that of people selling from door to door, allegedly on behalf of the disabled. Eventually, with the good will of the House, the Bill went through, became law and became effective on 1st January this year.

Sure enough, almost every firm which last year was operating that kind of practice of sympathy selling and using the word "disabled" has gone out of business, because the penalties involved are severe. But the rogues have taken a step sideways and are now selling not on behalf of the disabled, but allegedly on behalf of charities, and they are still using the sympathy approach. It is therefore important for the Secretary of State to have flexible powers to deal with many consumer trade abuses, not consumer trade practices as defined in the Bill.

I do not want in any way to undermine the authority of the Director General or of his advisory committee. I am sure that once they begin to operate they will perform a useful task, but one possible difficulty which occurs to me is that references to the advisory committee, however able the people on it might be, will take time to be considered, particularly if they are complicated references. Some of these trade abuses spring up almost overnight. Somebody has a brainwave, and he then starts to produce some sort of scheme to con the public out of their money.

To be able to deal with that kind of abuse it is necessary for the Secretary of State to have powers to introduce new orders quickly so that the abuse is stifled in the bud before many people lose their money. That is the purpose of the amendment. It seeks to ensure that in an urgent case the Secretary of State, irrespective of any report from the advisory committee, can ask the House to approve an order to tackle a particular trade abuse.

I am not particularly concerned about the wording of the amendment. The principle behind it is that the Minister should have flexible powers to be able to take action irrespective of the whole panoply of measures included in the Bill.

I stress again that it is not my intention to try to undermine the Director General or the advisory committee. I believe, however, that the incidence of sudden changes in the actions of the sort of rogues about whom I have been talking is likely to grow. They are looking for new means of making money quickly at the public's expense. I am trying to give the Secretary of State sufficient power to deal with them.

Mr. Raphael Tuck (Watford)

I support root and branch the amendment moved by my hon. Friend the Member for Sedgefield (Mr. David Reed). After having considered the consultative document produced by the Minister for Trade and Consumer Affairs, I suggested in a letter to him that the fact that these pyramid selling companies had welcomed his consultative document should put him on his guard, because they were likely to get round the provisions that he was suggesting, where necessary, to curb their activities. I thought then that the Bill which I have introduced was watertight, I did not appreciate that companies could still get round it. They can do so in a host of ingenious ways.

My hon. Friend the Member for Sedge-field has conceived a most ingenious device in the amendment. I do not like to say "set a thief to catch a thief", but he is able to do this. This device would prevent companies from getting round either the provisions of any Bill which the right hon. and learned Gentleman might introduce or those of my Bill. I should be most content to abdicate my Bill, if necessary, in favour of the provisions proposed by my hon. Friend. His amendment would not detract from the authority of the Director General but it would make that authority flexible. If companies get round the Bill in a certain way and start another racket, it could be pounced upon easily and quickly by the Secretary of Slate in making regulations. In this sense, therefore, I warmly commend the amendment.

Mr. Ray Mawby (Totnes)

I am a little concerned about the points that have been made. First, I believe that this is the wrong sort of Bill to deal with this kind of practice. It is dealing basically with consumers and it should not concern itself with arrangements between manufacturers and wholesalers, wholesalers and retailers and so on.

Both the hon. Member for Sedgefield (Mr. David Reed) and the hon. Member for Watford (Mr. Raphael Tuck) have said that it is extremely difficult to draft a Bill without accepting certain tactical facts of life. I found the same problem in trying to draft a Bill to deal with this matter. It is very easy to aim at the practices which we all know are extremely bad but at the same time to catch with that sort of legislation practices which we would consider perfectly normal, such as the many franchise arrangements which have been in operation for many years. It is difficult to draft legislation which will catch those whom one wants to catch but will leave the others in operation.

The second point which worries me, more so than the first point, is that if this proposition were carried through it would give any Secretary of State complete carte blanche to be able to say "In my opinion this particular practice is bad and all that I shall do is issue an order saying that from now on that practice is kaput." Hon. Members may suggest that what we have is the sort of order which would be subject to an affirmative resolution. We all know what takes place when such orders are brought before the House. They are usually slipped in at the end of normal business. Usually it is a very short debate in which one is not able to go into all the pros and cons. Most hon. Members will automatically assume that the Minister and his Department know better than they do and that, therefore, they should not argue but should let the order go through.

Under a Conservative Government I am not particularly bothered about giving a Minister those powers. But once we had given a Conservative Minister such powers, the Labour Party—God forbid! —might return to power. This is a gift. It is the Socialists' dream to be able to say that a particular Minister can at any time calmly override the advisory committee which is being set up and the people who are supposed to know what they are talking about, and say "I shall now bring in a regulation because this particular practice is not working correctly."

Mr. Raphael Tuck

Surely the making of an order by the Secretary of State would not be introducing Socialism on a large scale. I know that the hon. Gentleman feels a sense of horror at a Socialist programme, but this proposition does not entail that. It is merely nipping in the bud any way out of the impasse in which these companies may be placed as a result of the Bill. Surely, any small disadvantage of allowing the Secretary of State to make an order is vastly outweighed by the great advantage of closing loopholes for this kind of operation.

Mr. Mawby

From that intervention it is obvious that the hon. Gentleman and I are on different wavelengths. He is automatically assuming that the Minister and his Department are full of the milk of human kindness, never make mistakes and will always do the right thing. It will not happen. We are all human. If someone has a particular idea that private enterprise is basically a bad thing but that one must seek to live with it because it is not politically opportune to nationalise everything at that moment, he might use this power; he might use it regularly, and not only to prevent a particular practice which is considered to be bad.

Mr. David Reed

As a Socialist, I am quite prepared to give a Conservative Minister this power, provided that we have the watchfulness of the Opposition Front Bench to ensure that the Minister does not try to slip through certain kinds of order. If I am prepared to make that concession to a Conservative Government, perhaps the hon. Gentleman would do the same thing for a Socialist Government.

Mr. Mawby

Clearly the hon. Gentleman is far more charitable than I. I do not see why I should agree to powers of that kind.

Mrs. Sally Oppenheim (Gloucester)

Before my hon. Friend advances his argument to a point at which he may find that he has to vote against the Bill, may I point out that there are provisions in the Bill which give the Secretary of State the right to make orders on the recommendation of the Director General?

Mr. Mawby

I have been a member of the House for a long time. In many of my speeches, under successive Governments, I have persistently objected to Bills which carried powers for the Secretary of State to do things by order. If something needs to be done, we ought to enshrine it in legislation and not give a Minister powers to issue a lot of orders.

That is the purist argument. In certain cases I accept that orders are the only way by which things can be done, but in the other cases the Minister is at least being advised by a group of people, an advisory committee or someone who has been specially appointed for his expertise on a particular subject. If this proposition were carried, the Minister could act without having to consult anyone. This would be dangerous.

The hon. Member for Watford and I both have Bills waiting in the queue. My right hon. and learned Friend has issued a splendid consultative document. I hope that he will be able to enshrine what he intends to do in understandable legislation. No doubt he is having great difficulties. However, when one cannot think of the right words it is too easy a way out to give a Minister, whoever he might be, blanket powers to disregard the expert bodies and do what he wants to do by order.

In general I object to any Minister being given more powers to do things by order. In this case the amendment, although we understand what is sought, would give far too much power, and I would certainly oppose it if it were pressed to a Division.

7.0 p.m.

Mr. Michael Cocks (Bristol, South)

I am pleased to support the amendment. I would lay particular stress on the word "urgent", because there are commercial abuses which are so bad that they can brook no delay. The Minister should have the courage to give himself the powers to deal with this matter without allowing anything to stand in his way.

Perhaps I might give one or two examples. Tomorrow I have down for Second Reading two Bills designed to deal with two current abuses in commer- cial life. One of them is the Hospital Insurance (Limitation and Publication) Bill. I presented it to the House recently as an attempt to deal with the "cash in hospital only" schemes which are now heavily advertised.

Although the matter is covered by Clause 26, which deals with the misleading of consumers by inadequate information, and by the provisions concerning consumers being subjected to undue pressure, if it is dealt with through the advisory committee under Clause 17 there is bound to be delay, so that a number of people will be lulled into taking up these schemes at great cost to themselves and with doubtful benefit. The Minister should therefore give himself the power to take urgent action.

I do not wish to continue about the hospital insurance schemes because I presented the case to the House only recently. I should, however, like the Minister to consider cases in which these powers would be useful for taking urgent action. That is dealt with in the second Bill which I am presenting tomorrow for Second Reading, the Loan Interest Rate Publication Bill. These Bills will probably be objected to, possibly not so crudely or openly as by the Whips, but no doubt from somewhere on the Conservative side a voice will come effectively to put in the boot.

However, even at this late stage the Minister should make representations through the good offices of his Whips that the Loan Interest Rate Publication Bill at least should be allowed to have a Second Reading unscathed because it deals with precisely the sort of situation—

Mr. Deputy Speaker

Order. I recognise the hon. Member's opportunity today as he sees it, but I hope that he will not continue in this vein.

Mr. Cocks

I realise that I am trying your patience, Mr. Deputy Speaker, but I hope in a moment to show the relevance of what I am saying. The Minister will recall that he took urgent action on the question of second mortgages, and he took the opportunity of an Adjournment debate initiated by the hon. Member for Gloucester (Mrs. Sally Oppenheim) to announce a code of practice which, he said, he intended to try to get observed by finance companies. That was an example of urgent action such as we are calling for in the amendment, and the Minister put it to the House as an effective way of controlling what he recognised was an abuse.

I have singled out one of the items covered—the publication of loan interest —because the Minister's code, produced in all good faith to deal urgently with the situation, is effective only to some degree. I wrote to over 2,000 firms advertising mortgages and advances in Bristol. They replied saying that they were observing the code, but the interest rates charged varied widely from one to another and the customer does not know what the rates will be until he receives the details from the firms or until he is able to work out the rates from occasional information given in the newspapers.

There are urgent situations which need action immediately. Certainly in the long term the advisory committee can produce the sort of report required in a nation the size of Britain, but every day's delay means that possibly hundreds, or even thousands, of people may be considering taking out schemes which the Department will know full well are inadvisable and certainly not in their best interests.

Therefore, any delay through the advisory committee channels is unacceptable. It may be all right in normal commercial practice but for things which occur from time to time I suggest that the existing provision is inadequate. I ask the Minister to accept the amendment so that he can take the urgent control that is necessary in these circumstances.

Mr. Alan Williams

I can assure my hon. Friend that the voluntary code to which he referred is very much a sham because, as I pointed out to the House yesterday, advice has gone out from the Department of Trade and Industry telling the finance houses that they need not observe the code on second mortgages over £3,000. The large second mortgage escapes the so-called voluntary code anyhow.

In Committee we were told by the Minister that prices were not included within the legislation but that they were covered by the Counter-Inflation Act. Eventually we accepted that explanation, although with some reticence. Will he say whether the refusal to give a price is covered by the legislation and whether our amendment will give him the necessary power to bring that abuse within the legislation since it is a situation where swift action would be needed?

There was an interesting letter in The Times on Tuesday from, strangely enough, a Mrs. Heath. She had been trying to buy a new bed. She could not get a quotation of a price from the shops because they said that every delivery from the manufacturers had a higher price than before and such was the rate of inflation that they could not guarantee what the price would be. Apparently they could take orders for the item that she wanted but were unable to tell her what the cost would be when she eventually took delivery.

She obviously thought, as we did in Committee, that the Counter-Inflation Act would cover the matter and that there was no need for her to look in the direction of the Department of Trade and Industry. She telephoned the Price Commission. When asked whether the company had a turnover of £50 million, or of between £5 million and £50 million, or of between £1 million and £5 million, or of under £1 million she had to confess that on the spur of the moment she did not know.

She was asked what the price of the bed was six months ago and she said she could not say because the firm had refused to give her the information. They asked what the price was now and she said that she could not say because the firm had refused to give a new price. She was told "We cannot, Madam, investigate an assumption". So it seems that the situation exists in which firms are able to take orders and to refuse to give prices for the goods that are ordered. This situation seems to fall between the two pieces of legislation unless the Minister will be able to act himself to deal with this abuse under this legislation when it is passed. When Mrs. Heath eventually obtains her bed—I hope that she will obtain it at a reasonable price—how will she know, as the Price Commission is refusing to publish all the price increases which it approves, whether she is paying a fair price? To whom can she go? Can she ask the Department of Trade and Industry? It seems that the Price Commission is working very much on the basis that it is up to the Department to decide which items are important and which are not. It seems that it will give publicity only to those price increases which it regards as important. I hope that the House will accept that I have spoken very pertinently to this amendment.

In an urgent situation under the Bill as it now stands could the Minister act alone? Could he act alone and go through the procedures of making an order without the initial steps which are envisaged without the recommendation of the Director General? I assume that he could not. However, if he could, and if he did make such an order, would the Director General have the right to make any subsequent comment and observation upon an order which he did not approve?

Mr. Emery

The amendment was in many ways covered by the part of the debate which my right hon. and learned Friend answered yesterday. As a number of new matters have been raised, some with varying relevance to the amendment, I shall try quickly to answer the questions which have been put to me.

In the event of anybody reading only today's HANSARD and not knowing about what happened yesterday, it must be right for me to stress the condemnation which the Government have for the aspect of marketing by a chain letter process which is now known as pyramid selling, and the desire which the Government have to take urgent action to overcome that process. Proof that we mean what we say is the issue of the consultative document and the statement made yesterday by my right hon. and learned Friend that the most careful consideration is being given to the replies which we have had following the consultative document. We are doing everything possible to see whether at a later stage we can use the Bill for a full and thorough piece of legislation to cope with pyramid selling.

I accept, as the hon. Member for Sedgefield (Mr. David Reed) pointed out, that in any legislation there is a need for flexibility. I feel strongly, as he does, that the lack of any code of ethics by the people manipulating the type of marketing known as pyramid selling is such that they can spring up overnight. They will look for every loophole to try to get round any regulations. It is of the greatest importance that legislation should be as thorough and as comprehensive as possible.

The hon. Member for Watford (Mr. Raphael Tuck) supported the amendment. I should not want to endorse his description of setting a thief to catch a thief. That was a hard description to use amongst supposedly honourable Members.

Obviously there was some ingenuity in the amendment moved by the hon. Member for Sedgefield. I am certain that he realises—and it is important—that he did not mention all the aspects of this matter. If he had done so his amendment would have fallen to the ground. His amendment was linked with an amendment to a new clause which was discussed yesterday. It would have brought systems of marketing and distribution within the definition of a consumer trade practice. The fact that it is not the case means that his desire to catch by order-making procedure the pyramid selling technique is not applicable. I have a considerable feeling in my bones that he moved the amendment for the purpose of finding out what the Government had to say about pyramid selling.

My hon. Friend the Member for Totnes (Mr. Mawby) is entirely correct in underlining the difficulty of drafting a Bill to catch people when it is necessary to catch the whole of the pyramid selling operation. However, I am not certain that this is necessarily the wrong sort of Bill. But I think that this is the wrong place in the Bill. The Bill does not deal just with consumers. It deals with monopoly and merger situations. If we can ensure that it is covered within the scope of the Long Title in a later stage I believe that the House would welcome the Government being able to act quickly and to use the Bill.

I shall deal with the general principle behind the amendment. The powers to make an order are just about as wide as it is possible to give any Minister. It could be said that if these powers were given to me I should be able to behave like an angel and never make a mistake. If anybody believes that, he is even sillier than I should have given him credit for. Of course Ministers make errors. Governments are not always correct. That is why in the order-making procedure we have set up a specific appeal. That appeal has to be considered by the Director General and it has to go to the CPAC as another body which can act as a sieve. It will then go to the Secretary of State and from the Secretary of State to this House.

We have rightly guarded the very considerable powers which the order-making procedure will allow because it will be possible for us to act fairly quickly. I do not accept—even though such powers might be extremeily pleasant to have as a Minister—that any Government should necessarily have powers which are as wide as the amendment would suggest. They would mean that a number of items could be dealt with way beyond the aspect of pyramid selling.

I shall deal quickly with the point raised by the hon. Member for Bristol, South (Mr. Michael Cocks) about the publication of loan interest in consumer credit matters. I do not believe that the Bill is the right place for that matter to be covered. It will be covered by consumer credit legislation which the hon. Gentleman knows the Government have pledged to bring forward.

The hon. Member for Swansea, West suggested that the code I introduced was a "sham". I am sorry that he should go to that extent, because that is not the case. His description is a political attempt to denigrate a provision which is having a considerable effect in ensuring that the small borrowers have knowledge of certain basic facts when they apply for a second mortgage. It might interest the House that 94 per cent. of a sample which was taken by the Department of Trade and Industry in one month of last year indicated that all second mortgages are below £3,000. The point is that the way in which the interest rate and certain aspects of brokerage and commissions on loans above £3,000 are calculated is entirely different. I am afraid that what the hon. Gentleman said shows his complete lack of knowledge both of the working of the code and of second mortgages.

To sum up, I understand the desires of the hon. Member for Sedgefield. I endorse his wish to proceed fully and quickly on pyramid selling. He knows as well as I do the complications, and I hope that he will accept the assurance given to him yesterday by my right hon. and learned Friend and those that I have given today. I feel sure that he will recognise the technical inaccuracies in the drafting of the amendment, but it has at least enabled us to have this debate.

Mr. David Reed

During the three years in which I have been a Member of the House I have never done as well as I have today. Within half an hour I have been described as a thief and as a provider of a Socialist dream. My hon. Friend the Member for Watford (Mr. Raphael Tuck) may have been affected by our earlier debate about the professions, and that may have swayed his judgment.

I accept the Minister's arguments. I see that the Government are tackling this problem urgently, but I wish that they had begun to tackle it urgently when they were first asked to do so about 18 months ago. I welcome this belated conversion and I hope that when the legislation eventually comes it will be as thorough as it needs to be. I warn the Minister that the suggestions which he puts forward will be closely scrutinised. I am afraid that the Minister will find it immensely difficult to plug all the loopholes, but I wish him the best of luck.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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