§ 4.16 p.m.
§ The Lord Advocate (Lord Cameron of Lochbroom)
My Lords, I beg to move that the Bill be now read a second time. The purpose of this important Bill is to improve consumer protection. The best protection for consumers lies in a free and fair market. Such a market offers choice and sufficient information for consumers to decide what for them offers the best value for money.
Some practices distort fair markets. Unsafe goods cause death and injury. Their suppliers gain an unfair advantage over reputable businesses who incur the cost of ensuring their goods are safe. Similarly, misleading price indications give traders who use them an unfair advantage. They prevent consumers obtaining the best value for their money. The Bill makes markets fairer and improves consumer protection by addressing these two vital issues; that is, the safety of goods and misleading price indications.
Turning to the Bill itself, Part I implements the EC directive on liability for defective products. I say "implements" advisedly: the Bill does no more and no less. Noble Lords will recall that this matter has been under discussion for some time. The Pearson Commission examined the law on civil liability and compensation for personal injury and reported to Parliament in 1978. Your Lordships debated the report on 28th November 1979. Both the Law Commission and the Scottish Law Commission also examined the law on loss or damage caused by defective products. All three commissions recommended that manufacturers should be strictly liable for death or personal injury arising from a defect in their product, subject always to certain defences, irrespective of whether the manufacturer had been negligent.
Consideration in the European Community took place over a period of some ten years and has been closely followed by the House. It was the subject of two 1004 reports by the Select Committee on the European Communities. The second was debated on the Floor of the House. The directive was finally adopted in July 1985.
My Lords, this protracted consideration allowed exceptionally thorough consultation to take place. All three commissions invited evidence, and full public consultation took place in the United Kingdom both before and after the adoption of the directive. Last year, some 5,000 copies of a consultative document were distributed and over 200 replies were received.
As noble Lords will be aware, compensation for damage caused by defective products can at present be obtained by two main routes, contract and the law of negligence. Under contract law, compensation for injury caused by a defective product is only available to the purchaser from his immediate supplier. If somebody other than the purchaser is injured he can only obtain compensation if he can show that someone in the chain of supply was negligent.
Part I of the Bill is intended to overcome these gaps in the law by making manufacturers strictly liable for injury arising from a defect in their products; that is to say, any person, purchaser or not, who can show that he has sustained injury as a result of a defect in a product will be able to sue the producer directly and there will be no need to prove negligence. The word "defect" in this context has a particular meaning; namely, failure to provide the safety people can reasonably expect. Liability arises only if the defective product causes injury or death or damage to private property.
Consumers will benefit from certainty in this area of law and that throughout the European Community, and in particular from the ability to claim compensation without having to prove negligence. Retailers will benefit because the Bill channels liability towards the manufacturer who made the defective product, or, if appropriate, its importer into the Community. While the aim of the directive is harmonisation, there are three areas in which member states may derogate from its core provisions. We do not intend to take up any of these derogations. First, the directive and this Bill exclude liability for primary agricultural products. Although member states may derogate from this provision, to my knowledge no member state intends to do so. I think it right that we follow suit.
Secondly, the Bill retains the development risks defence. Thus a producer will not be liable if, but only if, he proves that the state of scientific and technical knowledge at the time of supply was such that he could not have discovered the defect. We believe that without the development risks defence, innovation would be stifled. That would not be in the interests of either industry or consumers. The third derogation allows us to limit the total liability incurred by a manufacturer, as a result of a particular defect, to around £40 million. We are not pursuing this derogation because it might lead to injustices where there are multiple claims, and to delays in payment where there is a possibility of further claims in respect of the same product.
Part I provides for the compensation of those injured by defective products. Part II, which 1005 complements it, aims to prevent defective consumer goods reaching the market at all. Noble Lords will be aware that there is already legislation which makes the supply of certain types of unsafe goods a criminal offence. The difficulty is that each type of product must be tackled by a separate statutory instrument. Inevitably, some dangerous products are not subject to any regulations. The Government announced their policy on these matters in a White Paper, The Safety of Goods, in July 1984. The proposals for extending enforcement powers have already been given effect by the Consumer Safety (Amendment) Act 1986. They are consolidated in Parts II and IV of this Bill.
Part II introduces the general safety requirement. This will make it a criminal offence to supply any unsafe consumer goods. It will be a defence to show that the goods conform with an approved safety standard or otherwise meet the same level of safety. We intend to approve a comprehensive regime of standards for this purpose. This will be a useful reminder to manufacturers and their customers of the importance of standards in achieving high levels of safety and quality. Unlike Part I, Part II applies throughout the chain of supply. Retailers, however, cannot be expected always to have specialised knowledge about the manufacture of goods. They will therefore have a defence if they can show that they neither knew nor had reasonable grounds for believing that their goods contravened the general safety requirement.
Part III of the Bill deals with misleading price indications. These are at present covered by Section 11 of the Trade Descriptions Act 1968 and the Price Marking (Bargain Offers) Order 1979. This legislation has been widely criticised. The provisions are far from comprehensive. They do not cover the full range of goods, services, accommodation and facilities. They proceed by prohibiting particular practices. Also, the Trade Descriptions Act allows traders not to comply with some provisions if they make that fact clear. The result is to leave gaps which permit rogue traders to mislead consumers, and so gain an unfair advantage over more scrupulous competitors. Furthermore, the bargain offers order is also extremely complex, poorly understood and difficult to enforce.
As a result of the criticism, the Government asked the Director General of Fair Trading to review the bargain offers order. He recommended strengthening it and, in the longer term, legislating with greater precision and flexibility. Following further consultation, a working party of officials undertook a general review of the legislation on price indications. They reported in February 1984, and their proposals were widely welcomed. As in the case of safety, we propose a general requirement. Clause 20 therefore creates an offence of giving a misleading price indication in relation to goods, services, accommodation or facilities.
Traders clearly need guidance on interpreting such a general offence. The Bill therefore makes provision for a code of practice. Noble Lords may recall that in January this year we debated the status of codes of practice. At that time I wound up for the Government. Three main points emerged from that debate. The first was that the status of a code of practice should be made clear in primary legislation. Clause 20(4) gives 1006 the code evidential status. Clause 24(1) provides traders with a defence if they have complied with relevant requirements of the code. This status is essential to enable traders to know when they are acting within the law. It will not be an offence to contravene the code. The second point which was made in the debate was that codes should be subject to an appropriate parliamentary procedure. Clause 25 provides for this code to be approved by an order subject to negative resolution procedure.
Finally, a number of noble Lords said that codes should be available before legislation receives Royal Assent. The latest draft of the price indications code—which takes account of the many helpful comments we have received during public consultations—was placed in the Library of the House when the Bill was introduced.
Clause 26 enables the Secretary of State to make regulations to prohibit or prescribe particular price marking practices. We intend to use the power to retain the prohibition under the bargain offers order on comparison with recommended retail prices in particular sectors. We also intend to require landlords who resell gas or electricity to provide their tenants with itemised bills. Part III will therefore provide more comprehensive and effective protection to consumers than the legislation it replaces, while also making life simpler for traders.
Part IV provides for the enforcement of Parts II and III. It consolidates, with minor amendments, the relevant provisions in the current legislation. Part V amends the Health and Safety at Work Act 1974. That Act is intended to ensure that safety considerations are properly taken into account before goods for use at work are supplied. The amendments will improve the working of the Act. The general duty is also to be extended to fairground equipment.
The remainder of Part V makes miscellaneous provisions, including a defence of due diligence for many of the offences contained in the Bill and civil liability for contravention of safety regulations. Part V also repeals the Trade Descriptions Act 1972, which requires origin marking of imported goods bearing certain kinds of marks in order to prevent consumers being misled into believing they are of United Kingdom origin.
The 1972 Act has been formally challenged by the European Commission. It is clear from the recent jurisprudence that the United Kingdom could not expect successfully to defend a European Court case against the Act. We are consulting interested parties on the scope—consistent with Community law—for a successor arrangement. Most British manufacturers will doubtless wish to continue to draw attention to the fact that their goods are made in Britain. The repeal of the 1972 Act will not prevent that.
My Lords, I am sure that the House will agree that this Bill offers real gains for business and consumers. Both will benefit from the more effective operation of the market mechanism. Supplying unsafe goods and giving misleading price indications are clearly harmful to consumers. They are also a way of getting an unfair competitive advantage over honest businesses. This Bill will do much to prevent both mischiefs.
§ Accordingly, I commend the Bill to your Lordships' House. I beg to move.
§ Moved, that the Bill be now read a second time—(Lord Cameron of Lochbroom.)
§ 4.31 p.m.
§ Lord Williams of Elvel
My Lords, we are grateful to the noble and learned Lord the Lord Advocate for taking us through the Bill now before your Lordships' House with his usual clarity and attention to detail. In return, I wish to make it clear on behalf of the Opposition that we welcome this Bill and, while we reserve our right to scrutinise it as it completes its passage through your Lordships' House, we shall do so without causing undue delay. We have criticisms of some of its measures, indeed, of some of the gaps in it. These I shall come to later. But we are wholly in favour of the general principles and will be constructive in our debates in Committee. Where we disagree with the Government on a number of points, as I fear we may, we shall be expeditious in our arguments.
Having said that, I hope that the noble and learned Lord will forgive me if I make one or two general comments which he may find unduly carping. First, I cannot help noting that consumer protection measures seem to come forward rather late in the life of a Parliament. Of course, it would be quite unworthy of me to suggest that this pattern is due to the electoral cycle, but it does seem to indicate that consumer protection is not really very high on the list of government priorities and that anything that is to be done had better be done nearer the general election rather than at a distant date so that voters will still remember rather than forget what has happened.
The example of the Fair Trading Act 1973, which some of us remember, comes to mind in this respect. To be charitable to the noble and learned Lord—and I am always charitable to him—there is, of course, another reason why such Bills come forward late in a Parliament. Consumer protection measures clearly cause considerable difficulty since inevitably they have to strike a balance between the legitimate interests of producers and the interests of consumers. And governments are always criticised by producers for going too far and by consumer organisations for not going far enough.
I accept that a balance has to be struck. This must be much more difficult in these circumstances for the Department of Trade and Industry which over the past year, has found itself in a sort of crossfire in many respects—indeed, some people would say "stranded on the barbed wire". It must be difficult for them to bring forward a Bill of this nature where the crossfire is going to occur again. But so far as the Opposition are concerned, with one or two reservations, I think the balance of the Bill is about right, or nearly right, and the Government are to be commended for that.
Of course, the CBI have complained. They would, would they not? And, since the CBI, as far as I can see, at their last conference, has declared some sort of war against the Labour Party, I am afraid that they are not going to get a great deal of sympathy from us. Indeed, I might remark in passing that had the CBI's appeal for help from us on the Financial Services Act come after 1008 rather than before the CBI conference, they would have received a very dusty answer indeed; and, as far as I am concerned, in future my telephone will be off the hook to that particular body.
We have had to wait a very long time for this Bill. The noble and learned Lord the Lord Advocate took us through the consultation that had taken place about the principle of product liability. After all, as he said, the Royal Commission on personal injury compensation reported as long ago as 1978; the report was debated in 1979 and the views of the Law Commission for England and Wales, the Law Commission for Scotland, the Council of Europe, the Law Society and the TUC have all been known for some time. Why has it taken so long to bring forward legislation?
Do we really need to be pushed by a Community directive in order to legislate on these important matters?—because the problem with delay in such legislation has been notably shown up in the problem of toy safety. The toy safety problem is still with us and, despite the Consumer Safety (Amendment) Act 1986 and some of the slightly feeble efforts on enforcement, there are still toys in the shops today which, if the Bill were now enacted, would be illegal and could be dealt with.
This question is linked with a further question. Since we have got a consumer protection measure, why cannot the Bill go just a little bit further? For instance, consumer credit has been in discussion for seven years with the European Community Consumer Affairs Council, and in the light of the current consumer credit boom—on which only today the DTI produced statistics—one would have thought that the issues are pretty clear and need dealing with. There is certainly a consumer protection element there which this Bill, in my view, could easily have covered. Nevertheless, we must be grateful for what we have and I shall now abandon the role of Scrooge and revert to the Bill which we have before us.
Part I, as the noble and learned Lord has explained to us, deals with product liability. We warmly support the main thrust of these proposals. The Government in our view are right to reject the view—as the Community were right to reject the view—that the imposition of strict product liability would give rise to the sort of problems that have been encountered in the United States which in some circles have been summarised in the phrase, "the liability crisis". The United States has quite a different approach to these matters, not least in the jury trial system in class actions, which give rise to punitive damage awards of a quite exaggerated nature.
I doubt whether the present proposals will give rise to these problems and I agree with the Government, although I am somewhat less sanguine than others—and I have to say this—on their ability to prevent the contingent-fee system, under which entrepreneurial lawyers seek business on the basis of a success fee, from encroaching here. Although the Law Societies are very anxious to prevent it, in my view there may be problems in the future on that matter.
On the third derogation that the noble and learned Lord mentioned, the Government are also right in our view, to resist the introduction of a financial limit to a 1009 producer's total liability, given the problems raised by multiple claims, interpretation of phrases such as "identical product" and "same defect" and so on. We endorse the Government's view on that.
At this point I am afraid that I must part company with the Government, because we differ from them in their attitude to the other two options which are allowed in the directive, both of which have aroused considerable controversy which we must recognise. First, perhaps I may speak to what is known as the "development risk" or "state of the art" defence which, in very brief terms, as the noble and learned Lord has explained, provides that the producer shall have a defence against a claim for damages if the state of scientific and technical knowledge was such that any defect could not reasonably have been detectable.
I recognise that this is a difficult area and any noble Lord who thinks that it is an easy problem really is missing the point. Nevertheless, the thalidomide tragedy and the Chinook helicopter disaster are fresh enough in all your Lordships' minds to make us believe that we must pause seriously before adopting the Government's position. I must state quite frankly that the Opposition take a different view from the Government on this issue. We believe, with the Pearson Commission, that to exclude development risk from a regime of strict liability would be to leave a gap in the compensation cover through which, for example, the victims of another thalidomide disaster might easily slip. It is quite clear that a dangerous design defect has a greater potential than a manufacturing defect for widespread injury caused by a defective product range—as witness, for example, the series of accidents that overtook the McDonnell Douglas DC.10 as a result of a design fault in the tail assembly.
There are further problems with the Government's position. The directive seeks to harmonise the rules for strict liability throughout the Community. France already has such liability and, I understand, will not be seeking to avail itself of the derogation offered by the directive. Germany has strict liability for pharmaceuticals. Belgium has indicated that it, too, will not be seeking to give producers the development risk protection. In short, not only has no other member state announced its intention of exercising the option to introduce the development risks defence, but also, were some of them to do so—and I cite Germany, France and Belgium—this would involve repealing existing legislation which has widespread public support and therefore, in my view, would be politically impossible.
If we accept the Bill as it stands, Britain would inevitably become the testing ground for untried products which, if shown to have no defects, could then be marketed in the rest of the Community. I cannot believe that the British people will gladly submit to being guinea pigs. They have never done so, and, in my view, never will. The opposition will do all in its power to prevent it.
To those who argue that our attitude would "stifle innovation" in this country—that was, I believe the expression used by the noble and learned Lord—I would reply by asking them to specify precisely in what respect innovation has been stifled generally in the United States and France and specifically in 1010 Germany in the pharmaceutical industry. To those who claim that insurance for development risk will be more difficult, I would reply that all the evidence is that such insurance would still be available but at higher premiums. Those higher premiums, when passed on to the consumer, are a price (and we accept this) that the consumer should pay and would gladly pay for the extra protection available.
We disagree also with the Government's position on the third option, the agricultural product option. I have no intention at the moment of embarking on a debate on the meaning of the expression "industrial process". I simply note that almost all food bought in shops has undergone some form of processing. Milk has been pasteurised; grain has been milled; meat has been slaughtered and butchered; and even the innocent cabbage has been sprayed with a pesticide or an insecticide. I confess frankly that I do not understand what "industrial process" really means. Nor do I understand—I draw the attention of the noble and learned Lord to the words of the directive—what "initial processing" means. Then again, if I may quote from the preamble of the directive, I do not understand the meaning of,processing of an industrial nature which could cause a defect in these products".Until somebody can explain these matters in very much greater depth and clarity, we on this side are bound to take the view that the Government have taken the wrong decision on the matter, and we will seek to reverse it.
Part II of the Bill deals with the general duty on manufacturers, importers and retailers to supply safe goods. We welcome this part particularly, although, again, with some reservations on detail. As my noble friend Lady Nicol will be dealing with this matter later, I do not intend to detain your Lordships for long. I would simply say in response to what the noble and learned Lord, the Lord Advocate, said, that the status of a series of standards to which he referred and the relation between them and the general duty is something that we shall have to probe—noting, as I do, that the general safety requirement is qualified by the expression in the Bill,having regard to all the circumstances".I can see a few rocks ahead there, my Lords.
Part III of the Bill deals with misleading price indications. Here, I must confess to your Lordships that I have a strong sense of déejàa vu. When I was chairman of the Price Commission in the late 1970s everybody was much exercised by the problem of price indication: bargain offers, 2p off the recommended retail price, and so on. A great deal of fun was had by all, including the then Director General of Fair Trading. We all know, as the noble and learned Lord said, that the Price Marking (Bargain Offers) Order 1979 has not exactly worked to everybody's satisfaction. So people can no doubt enjoy themselves a lot more in dealing with a order problem that is exceptionally difficult to handle.
If the Government have a proper formula, and one which is right and reasonable, we on our side will give it a strong and warm welcome. Nevertheless, I have to enter one important caveat. It concerns, of course, the code of practice, compliance with which, under Clause 1011 24 of the Bill, would be an absolute defence to the charge of misleading pricing. As the noble and learned Lord pointed out, your Lordships debated in January of this year the whole status of codes of practice and the propriety of conferring rights in such codes unless those codes themselves are contained in secondary legislation.
What we seem to have here, according to the noble and learned Lord, is a situation where an order may be made bringing into effect a code of practice, the text of which is not open to parliamentary scrutiny. This seems to us to have the effect of elevating a code of practice beyond the role of guidance to the role of secondary legislation. Furthermore, there is not necessarily to be one code of practice. As the Bill specifies, there can be two, three or more, which the Secretary of State may approve. Compliance with those codes constitutes the same absolute defence against the charge of misleading pricing. We shall be probing this matter carefully in Committee, bearing in mind the constitutional implications of the treatment of codes of practice over which Parliament has no control.
Parts IV and V deal with enforcement and supplementary provisions; and I have only two comments to make on them. First, none of this legislation is any good unless it is enforced, and to enforce it the authorities must be given proper powers and proper finance. There are provisions under Clause 14 which lay burdens on enforcement authorities. Yet the ground is cut from under their feet in Clause 34, which allows only 48 hours for customs officers to detain imported goods to enable enforcement officers to test whether they comply with the law. This simply cannot be right.
Secondly, the Bill provides for weights and measures authorities throughout Great Britain to enforce the safety provisions and the misleading pricing provisions. These duties will certainly involve extra burdens on local authorities and their trading standards officers. Yet, in the Explanatory and Financial Memorandum, it is stated that there are not expected to be any implications for public expenditure or public service manpower. We are getting a bit tired of central government—particularly this central government—imposing obligations on local authorities, not footing the Bill and then attacking them for wasting ratepayers' money. It really will not do.
I have dealt with the main points of principle in the Bill. I cannot pretend that the Bill is free from controversy. And, no doubt, some of that controversy will be quite lively. However, I should be wrong not to reiterate what I said at the beginning of my speech about the welcome we give to this Bill. We shall ensure that the Bill passes through your Lordships' House in an expeditious manner. The noble Lord, Lord Lucas of Chilworth, who is to reply, knows how unnaturally it comes to me to say that the Government have produced a generally good Bill. However, I must in all honesty do so while continuing to insist that we shall try, during Committee stage, to make the Bill even better.
§ 4.53 p.m.
§ Baroness Burton of Coventry
My Lords, I should like to thank the noble and learned Lord the Lord Advocate for taking us so clearly and concisely through the Bill. In my remarks I shall be dealing with some of the points he made. As the noble Lord would expect, we on these Benches agree with some of those points and disagree with others; we shall take that further in Committee.
Having listened to the noble Lord, Lord Williams of Elvel, it seems that this side of the House is in agreement concerning the points we accept and those which we wish to change. However, I hope that in this Bill it will not be party divisions which surface but divisions from all sides of the House on matters which are not party matters but which concern consumers.
This Consumer Protection Bill is brought forward with the goodwill of us all, as the noble Lord, Lord Williams, has said. However, it leaves me with the query as to how many consumer protection measures we have had, at least during my 35 years' interest in consumer affairs. I am sure that the noble Baroness, Lady Elliot of Harwood, will agree with me that we seem to have had them in succession, one after the other. While welcoming, during all this time, what various governments have said they were trying to do, those of us with a considerable interest in and knowledge of these matters never felt that these measures went far enough, whatever the political party in power. I accept that that is probably a natural feeling on the part of anyone who feels strongly on any particular matter.
It has always seemed to me—and my mind now is running in the same direction as that of the noble Lord, Lord Williams—that consumers are always popular when elections loom. I am not at all sure in my own mind how popular basically—and I wish to emphasise the word "basically"—consumers are today. Ministers may give us praise and assurances of consideration. But what chance have any of those assurances of outweighing Treasury considerations? We have only to recall what happened over gas, water and electricity charges, and what is threatened concerning water today. I ask the House how much effect consideration for the consumer had in these matters.
The House may also recall Treasury proposals to the chairmen of the nationalised industries on 20th December 1984 which were fiercely opposed by those chairmen because they feared that those proposals would greatly increase the power of the Treasury over their industries. As a matter of fact, those consultative proposals were kept very quiet and were slipped through on 20th December by means of a Written Answer in another place. Although those proposals concerned Consumer Council matters, and although the chairmen were asked for their opinions on them, nothing went to the people concerned (the chairmen of the consumer councils) until, by accident, they learned that such proposals were in existence. Upon demand the Treasury proposals were then sent to them. I think that is a slight on consumers. Surely the proposals should have gone to the chairmen of the consumer councils to begin with. However, there was such a storm over all this that the proposed legislation was 1013 withdrawn in another place on 9th May 1985, as indicated in a Written Answer at col. 474 of Hansard of another place.
I want to mention a third example of Government consideration for the consumer. This concerns delay. How well we know the interminable delay and procrastination when progress is undesirable, however urgent the needs of the consumer. These things must be said. Where did interest for the consumer rank on the age-long procedure of guidelines for the nationalised industry consumer councils? The patience of this House allowed me to pursue the Minister by means of Questions from 23rd October 1983 until 17th October 1985. Even then, we were not finished. A month later, and in despair, I asked the Minister whether the Government proposed any action, legislative or otherwise, arising from those matters; or were we to drift along for another two years engulfed in bureaucracy?
I believe the Department of Trade and Industry would have liked, and in fact actually wished, to proceed with legislation along the lines of the Bill we are discussing today. But what chance had a mere department--never mind the consumer—when the Treasury once more entered the scene? It was decided that the privatisation of British Gas was all-important. I repeat to the House, what chance had any other legislation—never mind any consideration for the consumer—when competing against the Treasury and a measure involving a stock issue of £5½4 billion? We all know the answer to that one.
These remarks may seem to the Minister, and indeed to the House, an odd introduction to wishing a Bill well. However, I believe that nobody doubts my concern for the consumer, and I feel that the Government should realise that I, and certainly we on these Benches, want to be sure what is really being offered to the consumer. Whether the leopard has changed his spots permanently is another matter entirely, and I shall leave that matter there.
The Bill we are discussing today deals with three main points, as the Minister has explained. It deals with product liability, with general safety requirements and with misleading price indications. We shall be looking at all these matters in Committee, so I propose to be very brief today. However, I should like to say a few words on product liability. This has been referred to by the noble and learned Lord the Lord Advocate. Noble Lords will recall that on 30th July last year we extracted a statement in this House—"extracted" being the correct word. On page i of the Consumer Protection Bill which we are looking at today, we have the Explanatory and Financial Memorandum. In Part I headed "Product Liability" is the sentence:Part I of the Bill implements the EC Directive on product liability … which was adopted by the Council on 25 July 1985".At col. 162 of the Official Report of 25th July 1985, I said that we on these Benches thought it important that when deliberations had been going on for ten years the House should know of any decisons reached before adjourning for the Summer Recess. I think it is correct that we, the House and the Minister would much have preferred a completely harmonised regime throughout the European Community. The years of disagreement referred to made it quite clear that a 1014 common regime on the lines we suggested would never be agreed. It seemed that the package accepted by the Council of Ministers should at last allow real progress to be made. I personally was of the opinion that the only alternative to accepting the compromise was to continue for another decade or more without reaching agreement. I supported the action taken by the Government and expressed appreciation of the efforts made towards harmonisation of European law in this field, from which I believe both the consumer and industry will benefit. But today, some 18 months on, there is considerable discussion about what should now be done on this matter of product liability.
I believe that a major flaw in the Bill is what is termed the "development risks defence". Many of us in this House and outside believe that the Government have bowed to pressure from industry by including this in the Bill. At present, France, Belgium and Luxembourg are not prepared to accept such pressure; and neither is Germany in the matter of pharmaceuticals. I hope that noble Lords on all sides of the House will bring about the necessary changes during the Committee stage, and I imagine that everybody is looking forward to hearing the noble Lord, Lord Allen of Abbeydale, who I, and I think the House, regard as the expert on product liability.
On the general safety requirement and under the present safety laws the Government can make detailed safety regulations for particular categories of goods. The Government also have the power to take immediate action against anything which is shown to be unsafe by making prohibition orders forbidding its supply. But in practice an order will be made only when such goods are already on sale, and probably after some have been sold. According to the Consumers' Association, to which I am indebted for this information, the powers are not often used and there is no requirement on traders to supply safe goods. In fact the Consumers' Association says that during the past two or three years there have been a number of cases of dangerous products which cause harm to individuals continuing to be sold. I expect that we shall want to look hard at this aspect. In the meantime, when the Minister comes to reply will he confirm my understanding that the introduction of the general safety requirement will mean that all new consumer goods will be subject to the law and must comply with sound, modern standards of safety?
Over the years many of us in this House have taken part in discussions on misleading price indications, and I am sure that we shall do so again. The noble Lord, Lord Williams, went back to the late 1970s, and I seem to go back to the 1960s on these matters. I liked the summary given by the Department of Trade and Industry when it declared that Part III of the Bill has at its centre a general offence, which is,The offence of giving to consumers a misleading price indication about any goods, services, accommodation or facilities".I warn the Government that we shall want to look carefully at the actual status of the code of practice and at such old problems as the 28-day rule to compare prices.
Before concluding, and although the noble and learned Lord the Lord Advocate, mentioned this, the House will understand that I must put on the record what was told to me during the debate on the Queen's 1015 Speech. At col. 222 of the Official Report of Tuesday 18th November, the noble Lord, Lord Skelmersdale, said:We [the Government] intend to make regulations under Part III of the Consumer Protection Bill to require landlords who resell gas and electricity to give itemised bills to their tenants stating the number of units consumed and the statutory maximum price. These regulations will be made as soon as possible after the Bill receives Royal Assent".We on these Benches wish the Bill well. We hope that it will reach the statute book swiftly. I believe that we have an ally in the noble Lord, Lord Lucas of Chilworth, and I trust that this entirely non-party measure will signal a new departure in consumer affairs.
§ 5.4 p.m.
§ Lord Allen of Abbeydale
My Lords, I should like to add my welcome to this Bill, with perhaps a special word of appreciation at the outset for the general safety requirement in Clause 12. The clause may be open to criticism on points of detail but the general approach is one that I hope will mark a path to be followed by all our trading partners in the EC, extending possibly to goods for export as well as to those for home consumption.
Having said that, I propose to limit my remarks to the provisions about product liability, though I would certainly make no claim to live up to the advance billing kindly provided by the noble Baroness who has just spoken. It seems a quite long time ago since we were arguing about this directive, in a much earlier draft form, when I was a member of the Royal Commission on Civil Liability and Compensation for Personal Injury, the Pearson Commission. I realise that I am the only member of that commission now sitting in either House. It came as a very great relief last year, when one had almost given up hope, that at long last agreement was reached on the directive.
Perhaps I ought to give warning that the successful outcome here has made me think about having another go at some of the other Pearson recommendations which have been so sadly neglected, notwithstanding the somewhat perfunctory and inconclusive debate to which the noble and learned Lord the Lord Advocate referred; but that is by the way. At any rate, we have before us today these clauses dealing with product liability, and very welcome they are. But alas, we live in an imperfect world; and as the noble Lord, Lord Williams of Elvel, has already said so fluently, in two important respects what is proposed falls short of giving complete satisfaction.
The first of these points relates to the provision in Clause 2(4), to which the noble Lord, Lord Williams, referred, which says in effect that the new provisions about the applicant not having to prove fault do not apply in respect of any defect in game or agricultural produce which has not undergone an industrial process. This exemption is permitted under the directive, though I notice that the Bill does not quite follow the wording of the directive itself. For example, the directive, unlike the Bill, refers to primary agricultural products. I noticed that the noble and learned Lord the Lord Advocate used that phrase, addressing himself, as I saw it, to the directive and not to the Bill before us.
1016 The draftsman has also introduced a new complication by referring in Clause 1(2)(c) in the context of agricultural produce to "an industrial or other process". None of this perhaps matters very greatly, though it is a little mysterious; but what matters is that neither the directive nor the Bill tells us what is meant by "an industrial process". I go along with the noble Lord, Lord Williams, in thinking that this opens up scope for considerable argument.
I do not want to go into a great deal of detail today, but as an example let us take meat. Is it intended that, say, sirloin of beef and lamb chops should be in, but that mince and hamburgers should be out? Or do slaughtering and butchering of themselves constitute an industrial process, so that meat in general can never be covered by the exemption? Milk, which as I understand it is always treated, must always—and I agree with the noble Lord, Lord Williams—fall outside the exception, as I suppose must also frozen chickens at the supermarket. But what about fruit and vegetables? If one watches the enormous pea-viners at work they look a good deal more like sophisticated industrial machinery than much of what is to be seen in the factories. But as the peas are frozen anyway, they are presumably outside the exemption.
It seems to be assumed by many people who write about this matter that fruit such as apples will be within the exemption. But does not the large-scale use of pesticides—some of which I note had to be banned only last week—and fertilisers constitute an industrial process in which it can occasionally happen that the wrong concentrations are used or the wrong target sprayed? If all that is not an industrial process, what is it? One could go on and on, but I think enough has been said to suggest that the Bill conjures up a delightful prospect for the lawyers in the somewhat unromantic wonderland of fruit and veg; and a gloomy, somewhat expensive prospect of uncertainty for the poor citizen who actually suffers.
There is a simple way of avoiding all this ambiguity and doubt, and that is just to drop the provision. On the merits, anyway, that is what I think ought to be done. Can it really be justifiable to make it impossible for the citizen to enjoy the new rights conferred by this Bill when it comes to what he eats and drinks? The Pearson Commission thought not; and neither did the Law Commission for England and Wales.
Take fish, for example, which is an agricultural product for this purpose. Japanese consumers could testify to the terrible consequences of the contamination of fish by mercury; and it is not altogether unknown for shellfish in this country to cause harm. As the Law Commission put it, an individual who is made ill by eating poisonous fish should be able to look to the person who put the product into the stream of commerce. Article 15 of the directive allows a member state to derogate from this exemption for agricultural products. I think we ought to do just that.
My second point relates to the defence of development risks, to which previous speakers have referred. Here too the drafting of the Bill does not quite fit in with what is in the directive. Incidentally, I am advised that it is slightly more accurate to talk about development risks than the state of the art defence. Article 15 of the directive again permits any member 1017 state to leave this defence out of its domestic legislation. The Government have chosen not to do so. It is a decision which, like previous speakers, I regret and which as the Bill proceeds may possibly be reversed.
The Pearson Commission thought that this defence should not be allowed, as did the two Law Commissions and the Council of Europe. The West Germans, it has been pointed out, do not allow it for drugs; and I cannot help recalling that the circumstance surrounding the appointment of the Pearson Commission was the thalidomide tragedy. Your Lordships will recall that no United Kingdom court ever ruled that there was any legal liability on the producers or manufacturers of that drug. I am well aware that since then the safeguards against dangerous drugs have been strengthened. I appreciate too that under the Bill the burden of proof would fall squarely on the producer who advances the defence and that it would not be at all easy for him to discharge that burden.
Nevertheless, in the last resort it would still be possible for the individual citizen who had suffered harm to be left with the impossible task of proving fault or negligence; and no one could assert without reservation that another thalidomide-type tragedy could never happen. I think that the issue would arise very rarely; though to judge from the fuss made by some manufacturers your Lordships would think it had come up every other day. However, the very possibility ought to be ruled out altogether; and I fear that if it is not the Pearson Commission will have failed in one of its most deeply-held conclusions.
We hear a lot about the cost of insurance and the stifling of research and innovation. The noble and learned Lord the Lord Advocate touched on the second point in his interesting speech. Second Reading is not the occasion to go into that in great detail and today I shall say only that the insurance problem has been very greatly exaggerated—so it seems to me—and that I too am not aware that the West German drug manufacturers or the industrialists in France have found any crippling financial burden or any noticeable check to their innovation and inventiveness. It seems to be a point the validity of which I simply do not recognise, and without wishing to appear offensive I think it can only be described as parochial.
Pharmaceuticals and aerospace are the two industries where the sums at issue can be very considerable; but do not let us be led astray by the court findings in California. We copy the Americans in many ways—some of them good and some of them, like muzak, not so good. However, this is an area where I think there is not much risk of following their example, even, I hope, in the matter on which the noble Lord, Lord Williams, touched. I should be sorry indeed to see that happening. It reminds me, however, of the point that whatever the arguments about insurance here may be, our exporters somehow have to cover themselves for California and for the many countries where the development risk defence is not allowed and is not going to be allowed.
In conclusion, I say just this. The Bill very properly enshrines the principle that it is unjust for consumers who buy products in the expectation of reasonable safety to have to bear the consequences of the injuries 1018 caused by those products if they prove to be defective. To my mind, that principle should apply equally to defects which are discovered during the use of a product.
Article 15 of the directive provides for a review of the operation of this defence in 10 years' time and for a decision then on whether the relevant article in the directive should be repealed. Clause 8 of the Bill, as I read it, would allow for Clause 4(1)(c) to be repealed by subordinate instrument if the EC decision goes that way. I feel sure that it will. Why not bow to the inevitable and leave it out now?
§ 5.18 p.m.
Earl De La Warr
My Lords, I too start by congratulating my noble and learned friend on the helpful and extremely lucid way in which he introduced this Bill. I shall confine myself largely to Part I, which I fully support, and then say a little about Part II to conclude. I am in fact rather glad that I decided not to talk about Part III, because I did so without knowing that the noble Lord, Lord Williams, was going to lead for the Opposition. He will recall that many years ago when he was running the Prices and Incomes Board—
Earl De La Warr
I am sorry, my Lords; the Price Commission. I was running a national television rental business, and the noble Lord chased me all round the houses in making a report on the industry. I am happy to say that by a hairsbreadth he failed to catch me; but I fear I would not be so lucky another time.
I am speaking today as someone who has spent most of his business life in making products and selling them—in some cases selling them direct to the public as a retailer—but I claim no special knowledge of product liability. All I know is that when it reaches the courts it is an extremely complex matter and better left to the experts. It may be worth while repeating the definition of "defect" in Part I:there is a defect in a product … if the safety of the product is not such as persons generally are entitled to expect".I shall only comment that for commercial lawyers that must mean champagne and oysters.
As a manufacturer I have learnt a few simple lessons, and sometimes the hard way. The first one is that economic laws govern a man's commercial behaviour far more than the laws that are made by men in Parliament. The economic laws do not change with governments or with fashion, and in many ways they are immutable. Secondly, I have learnt that if I make something that the customers—I use the word "customers" advisedly and not the word "consumers"—judge to be of bad value, in the first place they will not buy it and, secondly, it will be of bad value just because they say so, for they are the judge and jury.
I make these rather simplistic points merely to set the scene and to insist that this is not a Bill to change commercial behaviour. As I see it, it is a Bill to help the customers and to guide the courts in the tiny fraction of the billions of transactions that finally end up before a magistrate or a judge.
1019 The Government's press statement which launched the Bill had this to say:It will be a major gain for consumers and a real opportunity for British industry".The part about the opportunity for industry quite frankly is rubbish. Industry has gone along with this legislation and in many cases welcomes it, but I do not think we can say that it is a real opportunity. I think that even the first part about the major gain for consumers errs somewhat on the side of hyperbole, for we know that consumer organisations have been very active during the preparation of this Bill. The only danger that I can foresee is that it will be oversold to the public, who will be led to expect a new order of things—some new Jerusalem—and that from now on manufacturers will be exposed as the baddies on whom vengeance can be wreaked. I hope—and so far I am pleased with the result—that noble Lords on the Benches opposite by their rhetoric will not encourage any such misconception.
Strict liability, which Part I of this Bill introduces, will of course make it easier for an unhappy customer to obtain redress when he does not have to prove negligence, but I think we should remember that during the past few years the courts have been moving toward inferring negligence on the part of the supplier, who has had to rebut this accusation when circumstances seemed to point to a lack of care. I want to put it to your Lordships that as it is being used today the law has already moved a quite long way toward strict liability. That is why I insist that Part I of this Bill is not a step change but a thoroughly sensible advance along a path that is already familiar. I share the Government's view and, I am happy to say, the view of the Opposition and the Community that it is manufacturers who are in the best position to carry the cost of defective goods. They can and do insure their risk.
From time to time it has been suggested, though I think not today in this House, that premiums on risk business will be in danger of multiplying so that smaller companies will be unable to afford them. My information from the insurance profession is that this is not likely to be so. Premiums have already increased enormously for two reasons, neither of which is connected with this Bill. The first is because two years ago risk insurance had a very bad year and it will take some time to recover. In the meantime reinsurance is extremely difficult to obtain, though not impossible. The second reason has already been referred to and concerns what is happening in the United States, where fantastic sums are being awarded by the courts and where there is this awful business of lawyers who are prepared to take a share in the boodle when they win and take nothing when they do not. I hope that the legal profession will create its own police force to see that such practices do not take root in this country. We do not want them.
That leads me to my last point on Part I. I am confident that in no circumstances will the Government allow themselves to be driven off the inclusion of the crucial Clause 4(1)(e); namely, the development risk defence. Abandonment of that clause would result in premiums becoming prohibitively high, and with respect I think this point 1020 has not been mentioned enough yet on the other side of the House. That is the information that I have received, and no doubt we shall be discussing this matter further. In my opinion—and I believe I can assure the House that I am speaking for the whole of manufacturing industry—such a situation could put much of this legislation in jeopardy and I beg the Government not to budge.
I have said that I fully support Part I of this Bill, but I have to admit to my noble friend that I am somewhat less happy about Part II. I do not oppose it but I am puzzled by it in certain ways. I am aware that in the White Paper the Government said they wanted to introduce a general duty on all suppliers to ensure that the goods they supply are safe in accordance with modern standards of safety. That is admirable, but does it have to follow that failure to stick to that general duty automatically makes it a crime, because the duty is laid upon them by the Government? I do not know. I am no lawyer; I merely ask for help from my noble friend, from the noble and learned Lords who will be speaking later as well as from the noble Baroness, Lady Nicol, with whom I have worked closely in a Select Committee. I am sorry to have to say that she has now left us to go to agriculture because she became bored with sewage sludge! I ask the Minister to help me because among other things it seems to me that to put a new crime in Part II on to a new tort in Part I is a little like piling Pelion upon Ossa. I understand that as my noble friend Lord Beaverbrook was the last of us to leave school, he will deal with that question.
The Bill states:goods fail to comply with the general safety requirement if they are not reasonably safe having regard to all the circumstances".As I am not a lawyer, I ask my noble friend whether or not he is able to give an assurance that with that instruction the courts will be able to turn the word "safety" into an absolute to enable them, if necessary, to send a man to gaol.
I have in mind also the case of a BMW motor car which has an anti-skid device fitted as standard. A BMW is in the medium to expensive range of cars. This device is not yet standard in a cheaper and smaller family car because it could not be fitted for the price. Given that the BMW is therefore safer, is it possible sometimes that safety is not absolute but is relative to price? Does that mean that sometimes a judge would have to find that a product was not safe enough considering its price? Would that not make it a relative thing?
My noble friend will readily perceive that I need more than a little help in order to support him 100 per cent. on Part II of the Bill. If my noble friend can point me on the straight and narrow path that leads to full support of the Government (and therefore to righteousness) I shall be forever in his debt.
§ 5.32 p.m.
§ Lord Gallacher
My Lords, I should like to speak principally to Part III of the Bill entitled "Misleading Price Indications", which, in the vernacular of the trade, can be reduced to "bargain offers". This is an important part of the Bill. I am glad that it has already been welcomed on all sides of the House because, 1021 undoubtedly, the law is at present little understood and even less, enforced. Anything that abolishes that unhappy situation must be welcomed by traders and consumers alike. It is also a necessary field of action because bargain offers are now a permanent part of the retail scene.
Sales, with bargain offers, are no longer confined to two a year when retailers display previous buying errors in their windows for all the world to see. Price reductions are available in most shops all year round. Consumers look and even wait for price reductions. They know that if they wait until after the first month to buy a garment in a certain fashion store the price will be anything from £2 to £10 less. The public are aware that such bargains are available.
Given the growth of the merchandising technique, it is important that consumers should not be deceived. This is dealt with in Part III of the Bill. It must also be urged upon the Government that controls, whatever form they finally take, must be practicable. We cannot have trading standards officers journeying to the head offices of multiple retailers to check their buying-in prices of merchandise. Examination of invoices is the last thing that any retailer will normally allow to anyone, even members of his own family. The markup in retailing is the most jealously guarded secret of all. It is right and proper that it should continue to be so.
Consumers, retailers and local authorities have given guarded approval to Part III of the Bill as it stands. All three groups have reservations about the code of practice in Clause 25 which in some ways is at the heart of Part III. Consumers want its defence capability toned down. Retailers profess unhappiness despite three drafts. The local authorities, are concerned about the cost of enforcing the code.
Reference has already been made to the discussion in your Lordships' House some time ago about codes in general. We can draw a distinction between codes that have been drawn up by trade associations and those that have the imprimatur of government or the Director General of Fair Trading upon them.
Trade association codes suffer from the defect that in order to be effective one would need a closed shop of employers. This will never be achieved for two main reasons. Many traders would not wish to join their trade association and, equally, many people in the association would not wish to have them as members. The trade code will not therefore be observed by a large section of the trade from the outset. In addition, many traders of high repute take the view that their name is what matters. Consequently they are against codes as such.
However, a code of the type envisaged in Part III of the Bill can be given a general welcome. In view of its importance, there may be merit, even at this late stage, in the Government considering a working party to attempt an agreed draft (or at least the highest common factor of agreement) before the Secretary of State reaches a definite decision upon the code. I envisage this working party being pitched at not too high a level and one in which practical experience of retailing is the main qualification for participation.
As regards retailers, at least four representatives would be needed; one from textiles or clothing; one 1022 from furniture, bedding and floor coverings; one from footwear; and one able to speak on behalf of radio, television and electrical products, to include both brown and white goods. I should like to see at least three practical consumers with experience of the problem, and two trading standards officers serving on the working party. A civil servant might chair it but I enter the caveat here that the Civil Service contribution to the working party should be minimal, attempting to assess what can be agreed rather than indicating the difficulties being experienced with particular drafts. Perhaps the Minister would give consideration to that possibility, obviously not this evening, but as this Bill progresses through your Lordships' House.
Will the Minister tell us who, other than the Secretary of State, can issue a code to which reference is made in Clause 25(1)? This is a matter of some concern. In the main, codes issued by the Secretary of State or the Director General of Fair Trading are acceptable. However, if the ability to issue codes is to go wider, we should like some indication of those persons to be so empowered.
I do not believe that many tears will be shed over the demise of Section 11 of the 1968 Trade Descriptions Act. Its demise is understandable in the light of what is now proposed in Part III. The 1968 Act, as a whole, is still a valuable consumer protection measure and deserves to be recognised as such. No one will be sad about the disappearance of the Price Marking (Bargain Offers) Order 1979. It was little understood, and more honoured by disclaimers than observers.
We are grateful to the noble and learned Lord, the Lord Advocate, for the assurances he gave us about what will happen following the repeal of the Trade Descriptions Act 1972. The possibility of being able to continue to make it clear that goods are made in Britain is welcome. That assurance will go some way towards helping retailers and British manufacturers.
I should like to ask the Minister what the import of Clause 27(2)(a) is. In what circumstances might the Secretary of State, wholly or partly, transfer any duty of a weights and measures authority to another person? What other person is contemplated here?
I should also like to ask to what extent, in the Government's judgment, Parts II and III of the Bill are in accordance with EC proposals, either definitive or formative. I raise that point because should your Lordships' House and the other place pass this measure, we should seek to avoid too soon thereafter having to amend it at the behest of the EC. If we are to see how the Bill works in practice, a number of years must pass before it is changed.
There is no reference in the Bill or the code to the use of coupons to reduce prices, mainly in the food trade. That is a device increasingly used by manufacturers of branded goods to counter the success of own brands promoted by large retailers. As we are well aware, own brands are often made by manufacturers of brand leaders which, in an attempt to retain public patronage for the brand leader, sometimes offer coupons which give the consumer something off the price. The exercise is an unexpected spin-off from the abolition of retail price maintenance.
1023 Coupons are disliked by consumers' organisations and by retailers, for different reasons. Consumers would prefer to see the manufacturers' recommended price or the recommended retail price of branded goods made known and then reduced rather than the use of the device of coupons. At present, consumers have no means of knowing what that price is. It does not appear on the pack, although it may appear on the shelf. In the days of RPM, packs carried the price and consumers knew what the prices were.
Retailers dislike handling coupons for a number of reasons, not least the delays they cause at check-outs even if short-run sales increase as a result. It also disturbs special promotion schemes which retailers frequently run these days.
The effect of coupons on sales of products in the long term is unknown. Consumers do not know whether prices have been advanced to take account of coupon discounts. The coupon sometimes relates to a future purchase or to a size of the goods larger than the consumer wants; so to that extent, it inhibits choice. Is the Minister prepared to say anything about coupon trading tonight or at some later stage, and whether it will be covered in the code, if not in the Bill?
A general welcome has been given to the Bill. That must be a source of great gratification to the Government. I am, however, always wary of the short agenda. I am equally wary of too great a measure of accord on any issue. Nevertheless, I hope that the Bill will pass speedily without too much discord. I am glad that the noble Lord leading for Her Majesty's Opposition, gave the assurance that he did because I think that it was fully merited.
§ 5.43 p.m.
§ Lord Airedale
My Lords, I did not know that the Government Chief Whip was going to invite me to take part in this debate. However, I should not like to refuse his kind invitation. In the circumstances, I shall not trespass long upon your Lordships' time. I am grateful to my noble friend Lady Burton for saying that she hoped that we would discuss this matter not upon party lines but always bearing in mind the consumers' interest. I take comfort from that. It makes it easier for me to make the few remarks upon which I now propose to embark.
Strict liability must be contrary to natural justice. I do not see how anyone could argue otherwise. That matter was put much better than I could put it by Lord Chief Justice Goddard when he said that the idea seemed to be gaining ground that when anybody gets injured somebody else has to be found and made to pay for it. But that, he said, was no part of the law of England. Of course, in his time it was not.
I can see that there is an element of rough justice here. A vast multinational corporation manufacturing motor cars can well afford to compensate the odd person who is injured by a defective car. At the end of the year, it will not notice the item in its annual accounts. If it starts to become embarrassed by such claims, it is perhaps a good piece of rough justice that it should pay without people having to prove negligence every time. But we are not just thinking about multinational corporations; we are thinking 1024 about the village carpenter and the small firm. When we consider their position under the Bill, justice looks rather more rough.
It is said that they can insure. I should like to join the noble Earl, Lord De La Warr, in his misgivings about insurance. The Bill makes no provision for any limited liability on claims. I make a plea to the Government: before the Committee stage, send a broker around Lloyd's to see whether he can obtain any insurance cover for unlimited liability. I shall be rather surprised if the answer is "Yes". Whether that be true or not, the one thing we may be sure of is that, if he can obtain it, the producer will pass on insurance costs to the consumer in the price of the goods.
The consumer is also a contributor to national insurance. I do not believe that at the end of the year it will make much difference to the consumer whether he pays a small contribution to the victims of a pure accident through increased prices for the goods or through a small increase in his national insurance contributions. I have no doubt that in a civilised, sophisticated society, the proper place for the injured person to look for his compensation is to national insurance.
Why am I not going to vote against the Second Reading of this Bill? I recognise that we belong to a good club. It has sent us a directive which I do not like, but one does not resign from a good club just because one does not like one of the rules. I presume that one does not resign from the Athenaeum merely because it does not serve kippers for breakfast. I do not propose to vote against the Second Reading, but your Lordships will realise that, like Gallio when St. Paul came before him, I care for none of these things.
§ 5.48 p.m.
§ Lord Stanley of Alderley
My Lords, it will not have escaped your Lordships' notice that according to Clause 2(4) agricultural products are excluded from the Bill. Indeed, my noble and learned friend the Lord Advocate said that no other member state has made agricultural produce liable. It is important that farmers in this country are not unfairly dealt with visá-vis their continental competitors, and they are competitors.
The noble Lord, Lord Williams, did not approve of that exception. In my opinion, he took a strange view in opposing the "state of the art" derogation by saying that if your Lordships did not amend the provision, we should be almost alone in the Community by not so doing. Something about "what is sauce for the goose" comes to my mind, because the approach to the problem by the noble Lord, Lord Williams, is not consistent. If the noble Lord wants the United Kingdom to be in line with other members of the Community in regard to the "state of the art" derogation, then surely we must be in line with other members of the Community in regard to agricultural produce, because they all take the same view as the United Kingdom Government.
I will not at this stage bore your Lordships with the many reasons why I happen to believe this particular decision to be right—and I can hear your Lordships saying, "He would, wouldn't he"—but I would warn your Lordships that, if you feel that this is unjust and farmer feather-bedding, there are no fewer than 19 1025 Acts of Parliament that control and regulate agricultural produce. I sincerely hope that your Lordships will not force me to go into detail at Committee stage on all these Acts of Parliament, otherwise I can see a repeat of the Wildlife and Countryside Act 1981.
However, I would ask the noble Lord, Lord Allen, who was worried about this provision, to look up two meaures. He mentioned milk. Perhaps he would like to look up the Milk and Dairy Regulations 1959. He was also worried about apples. Perhaps he would like to look up the Grading of Horticultural Produce (Amendment) Regulations 1973, just as a start.
I would ask your Lordships before Committee stage to look in particular at the Sale of Goods Act 1979, which demands that produce should be of marketable quality. Not only does the Bill demand that but, as my noble friend Lord De La Warr said, the customer will not buy it unless one actually conforms to the legislation.
Also, if anyone is still concerned about residues, particularly chemical ones in crops—I think the noble Lord, Lord Williams, was, and I am not sure that the noble Lord, Lord Allen, was not—may I ask noble Lords to refer to the Food and Environmental Protection Act 1985, which was discussed in considerable detail in your Lordships' House with, I think, a good deal of merit.
I shall say no more, and hope only that your Lordships will not force me to delay the House when, in Committee, defending Clause 2(4), for, like other Members of your Lordships' House, I wish the Bill a speedy passage on to the statute book.
§ 5.52 p.m.
§ Baroness Fisher of Rednal
My Lords, under existing legislation, consumer rights in relation to defective products can be exercised only against the seller of the goods. There is no right of action at present against the manufacturer or importer unless negligence can be shown. We therefore welcome the provisions of the Bill, which I think are a significant step forward in that consumers will have the right of action against the manufacturer or the importer. However, this will be of little substance and little assistance if the manufacturer or importer is himself of no substance; in other words, if he has no money.
It should not be assumed, as the noble Lord, Lord Airedale, said, that all manufacturers or importers are multinational organisations. Indeed, it is true to say that the Government are doing their very best to encourage free enterprise and small businesses. It could happen that, in the process of setting up a small business, on occasion one fails perhaps to provide all the safety that is necessary in the product that one is manufacturing. Therefore I think that the insurance aspect of the Bill has to be considered very seriously. I am not convinced in my own mind that the noble Earl was entirely correct in saying that the premiums would be so massive that they would put people out of business. I do not think that would be the case.
§ Baroness Fisher of Rednal
My Lords, I think that small businesses will be making a small amount of 1026 produce, and therefore their chances of reliability will be smaller. We all have to agree, if we drive motor cars, that whether or not we can afford to pay the insurance we have to pay it to keep within the law. Perhaps one can draw a parallel at that level. I suppose that is why some people drive Minis and some people drive Rolls-Royces.
I understand that certain problems regarding the existing legislation have arisen with trading standards officers when a breach of the law has been suspected. It seems not very clear even from this legislation whether a trading standards officer has any jurisdiction outside his own local authority. Perhaps I may give an example. It has been discovered in the Birmingham area that allegedly dangerous remould tyres have been put on sale in Birmingham. Trading standards officers have acted at that level and the tyres have been removed from sale in Birmingham. Here there is no problem because they have now been withdrawn.
However, the manufacturer of the tyres has a registered office in Cambridge, and the tyres are manufactured in Lincoln. Therefore who can take action in relation to the registered office and the production? Indeed, does every other local authority need to take individual action when one local authority finds there is a breach? We may have to look at this a little more seriously as we go through the Bill. As my noble friend Lord Williams said, the effective enforcement of the safety measures in the Bill obviously is of the most crucial importance. There is no use talking about them unless we act on them.
As to misleading prices, I always find that it is a great game to discover what is the best offer if I look in the evening Standard. There are all kinds of shops that sell electrical goods, televisions and tape recorders. Although there may be five pages of advertising one never finds in those five pages an advertisement for one shop selling something that another shop is selling, so one cannot compare the prices. One cannot think: "I will go to so-and-so because it is cheaper than so-and-so, and is a better offer." Although they are all selling the same kind of goods, they are not selling goods made by the same manufacturer, so one cannot make the comparison just by buying an evening paper. One has to trail round the shops to do that.
It would appear from what other noble Lords have said that the new code of practice will be as unworkable as the previous one. If there is to be a code of practice that is vague and complicated, obviously it will make things more difficult for the consumer but it might also lead to massive abuse by disreputable traders. Perhaps I may refer to the introduction of the general safety requirement. That will mean that all new—and I emphasise "new"—consumer goods will be subject to the law and must comply with modern safety standards.
I am never very clear how far we have gone with legislation. I should like to raise a point regarding the seating that is provided in coaches and aircraft. Obviously, that does not concern new consumer goods, and it is not an individual consumer protection; but it is a joint consumer protection for all the people who travel in coaches and aircraft. I am not very sure how far we have progressed in that legislation and whether it would come under what we call new consumer goods. 1027 I understand the fire regulations regarding the materials used in furniture manufacture. There is no need for the noble Lord to reply to this point tonight. He can let me know the answer at a later date. I do not know whether I am completely off course and the point is already catered for. I think that the law we have at the present moment gives ample scope to the unscrupulous trader. I say this very advisedly. I hope this matter will be sorted out in the legislation because many of the unscrupulous traders are dealing with shipments from far seas and bringing in what we call imported novelties or toys. At this time of the year our attention is drawn to the danger of toys. Only last week I saw an example of these toys. It was some kind of a weird snake. As it was pressed, it moved along. Somebody said to me that it was filled with Taiwan water. I do not know how safe Taiwan water is but no doubt it had been imported into this country—or perhaps crawled into this country would be a better expression. I hope that these articles will not be imported in the future.
There is a duty to supply safe goods. That duty should rest with the first supplier, and that must be the manufacturer or the importer if the products are entering this country. There should be much stricter safety requirements at the import level. We know that many toys which are dangerous can be found in many car boot sales, and so on. Very often it is difficult for trading standards officials to track them down. Therefore there must be stricter controls at the port of entry. The 48-hour rule is not at all satisfactory. If it were 48 hours in the working week that would have some advantage, but 48 hours just baldly is not satisfactory, especially with imported goods.
I was a Member of the European Parliament. I was a representative from the South. I took part in the proceedings on the Consumer Safety Bill when I was there in 1976. I was a Member until direct elections. I argued then and I argue today that I cannot see that it is morally right that we permit goods of lower safety standards to be manufactured in the EC and then sold abroad. If it is not good enough for the safety standards of the people of the EC, why should we accept that it is good enough for other people outside? I never understood it, and I argued it when we were dealing with this matter at the European Parliament. I may be wrong, and I may not have read the Bill correctly; but I think that is still enshrined in it.
I think I ought to refer to two other very small points. The National Pharmaceutical Association raised a particular difficulty regarding the dispensing pharmacist. Now, under the new medical regulations, they have to put their name on the product. The pharmacist's name must be on the article with the directions for use. It is not a correct interpretation to say that they are responsible because they have put their name on the product, and have held themselves out as the producer. It would be possible quite easily to identify the true manufacturer of the product. Several noble Lords have spoken about the exclusion of primary game and agricultural products. I come from that famous city called Birmingham, and there is a truly garden suburb in Birmingham which is called Cadbury Brothers. They are involved in the manufacture of dairy product chocolates. Along with 1028 other people who are involved in the production of products that take in agricultural ingredients, they are also concerned that the processor of the products may be liable. I understand that the food and drink industries in Germany, Belgium, the Netherlands and Denmark all take the view that the exemption for primary agricultural products should be withdrawn.
In conclusion, because I belong to the Buy British campaign, or because I feel so concerned about British manufacturing, I feel that the consumer should have available to him information relating to the place of manufacture of the goods. If we want to support home manufacture, we should be enabled to do so. I sincerely hope that nothing in this Bill will prevent us from being able to do that.
§ 6.7 p.m.
§ Lord Sainsbury
My Lords, my maiden speech on the 14th November 1962 was on the subject of consumer protection. I declared an interest then as I was chairman of the family firm bearing my name. With the passage of time I am no longer chairman and the firm is no longer a family one but a plc; but I still declare an interest, though a rather more remote one. On that occasion we were discussing the Molony Committee Report. A leading article in the Financial Times at that time, commenting on the report, stated:It is plainly right to stress continually that the consumers' hand cannot be held all the time and the world cannot be legislated to perfection".However, that does not mean that I do not welcome the Bill before your Lordships' House today as a considerable improvement on the unwieldy existing legislation. I also believe there is need to ensure greater consumer safety. The Consumers Association says:Hardly a week goes by without some warning about products which have been found to be dangerous, sometimes lethal. Toys, tools, novelties and furniture are just a few of the wide range of goods which have been involved in recent safety scares".The Bill provides a general safety requirement. It applies to all consumer goods. It makes it an offence to sell goods that do not comply with the general safety requirement. This, in my opinion, is a progressive move.
On product liability, I recall the debate we had some six years ago, in which I participated. Since then, at long last, some progress has been made by the adoption in July last year of the EC Directive on Product Liability. The directive, however, gives member states of the EC certain discretion in its implementation.
The Government have included in the Bill a development risk defence for manufacturers. This may protect them from having to pay out, in future, compensation for thalidomide-type tragedies. This decision has not pleased the consumer organisations but no doubt it has been welcomed by the CBI.
The food and drinks industries in the United Kingdom are very concerned that the proposed legislation on product liability does not include primary agricultural products. For example, canners and freezers feel that they might be held responsible for the presence of pesticide residues in manufactured foods, when they have no control over the prime producers who may misuse pesticides, either accidentally, negligently or wilfully. 1029 The Department of Trade and Industry has been told in strong terms that the situation would lead to much uncertainty, illogicality and unfairness. As derogation is permitted under the directive the position could he easily rectified. In fact the food and drink industries in Germany, Belgium, the Netherlands and Denmark all take the view that the exemption for primary agricultural products should be withdrawn. The noble Lord, Lord Mottistone, would have stated the case on behalf of the industries concerned but, unfortunately, he is unable to be present this afternoon.
§ Lord Stanley of Alderley
My Lords, will the noble Lord give way before he leaves that point? I hope that before we come to the Committee stage the noble Lord will make particular reference to the Food and Environment Protection Act and all the other Acts that I quoted in my speech because he will find that the point he mentioned about chemical residues is covered.
§ Lord Sainsbury
My Lords, I am sure that the noble Lord will read Hansard tomorrow and pick up the point.
I turn now to Part III of the Bill, "Misleading Price Indications" and the proposed code of practice. I should like to preface my remarks by stating quite clearly that responsible retailers welcome and support the general duty not to give misleading price indications. There are bound to be some difficulties in applying this duty. However, I am sure that it will in time provide a more flexible and coherent basis on which to control this matter.
My difficulties lie with the code of practice. This in part perpetuates the approach adopted through the bargain offers order of regulating price indications in detail. The bargain offers order has shown how difficult it is to intervene in this area. In 1981 the Director of Fair Trading found the order to be complex and ambiguous. In 1984 an interdepartmental working party concluded that despite its merits the order had,not worked adequately and has in fact led to new problems".As an alternative the working party proposed a general prohibition on false and misleading price claims, supported by a code of practice.
The new proposals were included in the White Paper Lifting the Burden, presumably on the basis that they offered a simplification of the existing legislation. There is a nice irony here. Section 11 of the Trade Descriptions Act 1968, consists of three subsections. The bargain offers order consists of seven articles. They are to be replaced by Part III of the Consumer Protection Bill which contains seven clauses, consisting of 32 subsections. There is also to be, in addition, a 22-page code of practice, consisting of four parts, 57 sub-clauses and two appendices. This hardly seems a process of simplification or deregulation.
Despite the frequent revisions, retailers, and I believe enforcement authorities and consumers, remain concerned that the draft code is unworkable. It contains a mixture of specific requirements, or "rules" and rather vague guidance. Moreover, each redraft—and this is now the third revision—has 1030 contained new anomalies, ambiguities and artificialities.
It certainly does not meet the criteria set by the noble Lord, Lord Lucas of Chilworth, in answer to a Parliamentary Question in February 1985, that:A sufficiently clear and precise code of practice",should be established before the details of the primary legislation are finalised.
I cannot see why it is not possible to support the general duty by a few specific requirements which are thought necessary to control real abuses. These could be included in the Bill and in regulations. The code could then stand as true guidance, worked out in conjunction with retail organisations, as the contemporary understanding of the spirit of the general duty. If this approach did not work the Bill contains ample power—some might think too ample—for the Secretary of State to issue new regulations and to change the code.
In conclusion, I wish the main provisions of the Bill well, but I hope that the Bill will be improved in the course of its passage through your Lordships' House.
§ 6.20 p.m.
§ Baroness Elliot of Harwood
My Lords, I too should like to congratulate the Government, and in particular the Minister for the way in which he has presented this Bill to us, and for the fact that it is a Bill which we can all support. Different points of view have been expressed in this debate and various changes and alterations have been suggested. However, on the whole all those who have spoken—and I add my support—think that the Bill is an important one, a good one, and we must ensure that it gets through this House.
My interest is quite a special one as I was the first chairman of the first Consumer Council set up more than 20 years ago—I cannot remember the exact date—by the then Macmillan Government. That is when I first became involved; but that does not bear comparison to the influence and effect that the noble Baroness, Lady Burton, has had on consumer affairs. No one has worked harder and done more than she has to bring this matter before the whole country. I feel she must be congratulated for having done more than anyone to try to get consumer affairs right into the heart of our parliamentary system.
Twenty or more years ago the Consumers Association was a very small affair. It has now grown to enormous proportions, having more than 800,000 members. It is vitally important, and I think we should be advised very often by what the Consumers Association puts out in its admirable publications.
I agree with the three main principles behind this Bill. First, product liability, making the producer liable for the damage caused by any defect in the product. Secondly, the great importance of safety requirements, making it an offence to supply unsafe goods. Thirdly, giving misleading descriptions and price indications.
The producer of goods on sale is generally the manufacturer or importer who is now made responsible for goods sold. Considering that importers come from all over the world, not only Europe, the 1031 importer is responsible and must see to the safety and the accuracy of the description of the imported article. I think that our regulations should be the same as those of other European countries like France, Belgium, Luxembourg or Germany.
I should like to raise one or two queries about the regulations, which other people have also mentioned, and which I am sure the Minister can answer. I had queried in my mind why agricultural produce was left out of the compensatory regulations, but the noble Lord, Lord Stanley, has given me the answer: namely, that it is already covered by a great number of Bills. It is an important point. There was also reference to industrial processing. What exactly does that mean? Does it include pre-packed food as well as fresh food? "Any foodstuffs" is a very wide term. What happens if food is contaminated by outside events, as mentioned by the noble Lord, Lord Allen, when he spoke of the thalidomide and Chernobyl disasters? These matters are vitally important and I think we must face up to them.
I agree that the question of pesticides used in agriculture should be carefully monitored. I believe that only yesterday a certain number of pesticides were forbidden, and I am sure for a very good reason.
Under the Bill safety is stressed, quite rightly, as regards obvious items like children's toys and equipment. However, secondhand goods seem to be excluded. What about expensive secondhand goods like cookers, electric fitments or motor cars? From the safety angle, these should be included, otherwise they should not be sold.
The law enforcement officers, who will be responsible to the consumers and county council associations under which they operate, are asked to see, inspect and test goods. This will mean much more work and need many more people. Will the county councils be helped to provide more trained inspectors? That is a query which, I am sure, will be raised by many county councils.
It seems that the code of practice, which many noble Lords have mentioned, should be universal and have the same status today in our country as the Highway Code. The code of practice is enormously important, and many of your Lordships who have spoken know much more about it than I do. I should like to support Lord Gallacher's suggestion: that there should be a committee formed, or very careful consideration given to the many interests involved in the code of practice. I think the matter should be very carefully considered, not only by ourselves but by the experts who are working in the field where the code of practice is applicable.
The Retail Consortium, from which I am sure many of your Lordships have received letters, considers that the present arrangements are not clear enough and are not understood by the ordinary person. It is extremely important that we should get that right, because the code of practice is of tremendous importance in the Bill and in the protection of the consumer.
The question of misleading price indications is also extremely important. That arises in most of our lives almost every time we engage in large buying. One is always making comparisons between prices. I think 1032 that it is very important and I am therefore all in favour of a ban on misleading prices. The present law of 28 days for covering price offers should remain, unless it can be improved upon.
I am sure that we have all received a great deal of information from many organisations and that many people will be asking the Minister these questions. The Bill is badly needed. In Committee amendments will be put forward and, like many other speakers this afternoon, I hope the Government will treat the Bill not as a party political matter but as one which affects us all. We all want it to be a success. It is not a party Bill; it is a Bill which we all wish to succeed, and I support it.
§ 6.28 p.m.
§ Lord Graham of Edmonton
My Lords, I begin, like every speaker in this debate, by thanking the Minister most sincerely for the very clear manner in which he outlined what we are about in this Second Reading and later stages of the Bill. I follow the noble Baroness, Lady Elliot who has a high reputation in these matters.
I recently attended the annual conference of the Association of British Travel Agents. The House will be sorry to learn that the association passed almost overwhelmingly a resolution that consumerism has gone far enough. Certainly, in this context, travel agents would be out on a limb. We are almost unanimous in this House, on both sides and from all sections, in believing that however far consumerism has gone there are always other improvements that can be made.
The noble Baroness, Lady Burton, reminded us of how many times moves have been made—in 1962, in 1972 and in 1982. But, always, there has been the slight regret that matters have not gone far enough. When the Bill is on the statute book, those of us who support it will say that it is a pity that we did not get a little more out of it. The Bill certainly has the support of the Government and the Opposition parties.
Those Members of your Lordships' House who, like myself, are interested in these matters, will have received briefs from a range of organisations—for example, the Retail Consortium, the enforcing authorities, the National Consumer Council, the Consumers Association and, only this morning, the Pharmaceutical Society of Great Britain and the Association of British Insurers—and will know that all of them welcome the Bill but wish to enter caveats and reservations about certain parts of it.
As is often the case in matters of this kind, I declare a direct interest and association with the Co-operative movement. The Co-operative movement can speak with some experience and authority on consumer matters, for it has expanded not only horizontally, but also vertically. We are the largest farmers in the country. We are also very much involved in the manufacturing and processing aspects. More than £5 billion is taken over the counters of Co-operative shops every year. Therefore, the Co-operative movement has an interest in many parts of the Bill. The movement has been interested in, and grateful for, clarification on certain matters prior to the Bill reaching this stage.
1033 One concern is product liability. We understand that a retail co-operative society will not be taken as the producer of a product which is clearly marked as having been produced by the Co-operative Wholesale Society. That is a very important point. Clause 2(3)(a) provides that a subsequent supplier, such as a retailer, can absolve himself of liability by identifying the producer of a product—the "own brander" or the Community importer—whether or not that producer is still in existence. That is a great relief, I imagine, to retailers. It is a major clarification that we welcome.
As has already been said, Second Reading is not the Committee stage. We shall be able to speak at length on the detailed ways in which we want to improve various aspects of the Bill. However, as has been made clear, we need to note that in any interpretation of Article 3.3 by the Department, the retailer may be deemed to be the producer where the manufacturer, supplier or importer, cannot be identified by virtue of the fact that he is no longer in business. I should like the Minister to take that point on board, and if he is unable to deal with it when he winds up ask him at least to bear in mind that we shall come back to it in Committee.
I ask that either tonight or later we have some clarification as regards the situation where the primary importer of a product is outside the United Kingdom but within the EC. In those circumstances, a retailer selling such a product in the United Kingdom might take the least line of resistance for the initiation of legal action if the producer—that is, the importer—is, for instance, in France. In those circumstances retailers may be subjected to civil actions taken as the first step in order to reach the producer. We shall want clarification from the Minister in respect of that point.
Comments have been made about what is meant by processing. As regards the exemption for primary agricultural products, I noted very carefully the defence of the Bill by the noble Lord, Lord Stanley. However, other noble Lords have raised the recent indication of the Government's concern about this matter, because only last week in another place the junior Minister for Agriculture, Mr. Donald Thompson, announced a pesticide ban following similar steps in the United States. At this stage I simply raise the point. I am sure that the Minister will understand that in Committee we shall need to be satisfied that the exemption is satisfactory so far as the consumer is concerned.
Reference has been made to the manner in which enforcement can be carried through. The House will understand that the Explanatory and Financial Memorandum to the Bill indicates that there will not be any implications for public expenditure or public service manpower. The Association of County Councils tells me that this is, at best, misleading, and that it would prefer to say that it is simply not true. One has only to look at current staffing levels, not in a particular council department, but in any council department, to realise that there is no fat available at all. Every council department is under severe strain. Indeed, that is how the Government want it; they want the situation to be very tight.
The Minister must tell us in his reply that he believes that no more work will be laid upon local councils, that there will be no need for more enforcement 1034 officers and that the existing enforcement officers will not need to do any more work. If, however, they are to do more work in some directions, the Minister should identify those of their present duties that will have to be neglected. In my view, the Association of County Councils has understood the situation correctly. It anticipates a considerable demand for advice, not only to the consumer but also to the trader. The trader needs to understand the rights of the consumer. The consumer advice services and the enforcement officers will need a great deal of support as regards that aspect.
Points have been made concerning the inclusion of the state of the art defence. I shook my head when the noble Earl, Lord De La Warr, said that this would be an enormous cost. I am not arguing whether or not it should be included, but the noble Earl should be aware that the Association of British Insurers tells me that, in the longer term, insurance premium rating levels will depend to some extent upon whether the introduction of strict liability leads to improved product quality and presentation and hence to fewer accidents caused by unsafe products. It goes on to say that, in its view, insurance companies are confident that insurance cover for liability under the new legislation will be available for current limits of indemnity at premium levels which will have only a marginal effect on the cost of production. I shall give way to the noble Earl.
Earl De La Warr
My Lords, I am much obliged to the noble Lord. Did not the association also express that view on the assumption that the Bill would remain as it is, with this particular defence still included?
§ Lord Graham of Edmonton
No, my Lords, with respect, it is arguing that if the defence were taken out and one then had to seek insurance cover for the liability, it does not see that as a punitive on-cost. My noble friend Lord Williams pointed out that it was an increase but said that if it was an additional cost which had to be borne by the consumer, then so be it.
I do not intend to pursue many of the other points which I have noted except to reinforce that made by my noble friend Lady Fisher concerning the position of local authorities. We have the situation under consumer safety, and we have the situation under Clause 14. However, there is the question of compensation. My noble friend pointed out that in that area it is likely to be almost impossible for local authorities to carry out their responsibilities. In fact, it may well lead to a number of local authorities deciding not to be good enforcing officers if, by taking an action which is subsequently proven to be injurious to the importer, they themselves are going to be liable for compensation.
I conclude, as many have, by giving the Ministers who will be taking the Bill through the House our assurance that it will not be delayed. But the points that I and others have raised indicate that we shall have an interesting and, I hope, fruitful and successful Committee stage.
§ 6.40 p.m.
§ Lord Young of Dartington
My Lords, I should like to join in the congratulations that have been given to the Government for introducing this Bill. I particularly 1035 subscribe to what has already been said by the noble Baroness Lady Burton, and the noble Lord, Lord Sainsbury, sitting directly in front of me. The Consumers Association, of which I have the honour to be the president, has been compaigning for many years in large part for just such a reform as this. That association is delighted that the Bill has been introduced, although of course it has reservations on points of detail, which have probably already been drawn to the attention of many noble Lords and will be so again before this Bill reaches the statute book. I was also chairman of the National Consumer Council, and that body has likewise been campaigning for the very reforms contained in this Bill.
I was pleased that the noble Baroness, Lady Elliot, spoke as she did about the Consumers Association and about the Bill itself. The noble Baroness has been a doughty champion of the consumer over many years since the first Consumer Council was set up. Unfortunately it had a very short life, but it was a distinguished life under her guidance and that of other people who stand high in the regard of people now in the councils of the Consumers Association and other bodies.
It is somewhat remarkable that almost the only objection that has been levelled against this Bill has been on a matter of rather high principle. There was a reference to natural justice. The noble and learned Lord who is to speak after me may have something to say on that subject. He is certainly a great deal more expert than I am. In so far as I understand it, there are many different opinions about what natural justice consists of. Perhaps I may say from my possibly simple-minded viewpoint that it is not in accord with natural justice, and could not be, if manufacturers of products, when presenting those products for consumption on the market, do not assure themselves and consumers that the products for which they are responsible are safe. If they are not safe and do injury to people because of a lack of safety, or a faulty design, then it seems to me that it is naturally just that the manufacturers should be responsible.
There is a further question about what defences should be available, but at least I hope we would all agree that there should be a presumption in these cases that manufacturers ought to be responsible for the quality (so far as safety is concerned and in other respects) of the products they put on the market. That apart, I think that remarkably there has been a general agreement that this Bill is what the public interest requires.
As for criticisms more of detail, there have been many, and I shall not go over them again. The Government will already know as well as anyone in this Chamber that a major debate is going to be at a later stage of this Bill about the good old state of the art defence—the development risks defence. I hope, although I fear that it is going to be in vain, that the Government may come to a different opinion about this and be prepared to give way when the amendments are produced, as they will be on this vital matter. I believe that if the Government continue to press the state of the art defence, a hole will be driven into the Bill which could be serious once it becomes law.
1036 The legalities have been touched on already, and will be in the debates that follow. I should like just to mention another point which has not been referred to so far, and that is about the consequences for consumers facing actions arising out of the Bill if this defence is retained in it. It is almost inevitable that this particular defence is one which will produce considerable costs. It is almost impossible for a manufacturer to make out this defence in full and convincing detail without a parade of expert witnesses and expert evidence of one kind or another, which is bound to be highly expensive to get.
The very fact that it is so expensive will be an ace—or could often be—not up the sleeve of a manufacturer but out on the table. Many consumers who might think that they have a proper right of action would be deterred because they know what the costs would be. One of the worst things that could happen to this Bill once it becomes an Act—as I hope it will speedily—is that there will be another thalidomide case. God forbid, but there might be. If there were, and the consumers took action and sued the manufacturers concerned and the case was rather long drawn-out—with public opinion firmly in favour of the victims, as in the thalidomide case—and then the action had to be settled because the consumers ran out of money and could not pursue it any further, that would be the worst possible advertisement for the Act. If it became a famous case it would almost certainly lead to the need for yet further legislation, and an undermining of all the good work that in this House and elsewhere in other places has been done on behalf of this Bill.
The only other point I want to make is about Part III, the part which deals with misleading information. This again is much to be welcomed in general, but again it is the question of defence which is the most cardinal question which needs to be raised, and will be raised later. Much is made in this part—and rightly up to a point—of the need for codes of practice, and the question is whether the right role is given to the proposed codes of practice. I fear that it definitely is not.
The example I want to try to put before your Lordships may make the point clearer. It comes from British Telecom and the considerable debate that there now is in some circles about what are called M-rates. Not all noble Lords may know what an M-rate is. That is one of the troubles because consumers do not know either. As many will know, what has happened is that British Telecom has found an important new source of revenue in premium calls. It is possible for contractors to provide information, and for the proceeds to be shared 50:50 between the contractor and British Telecom. Quite large numbers of contractors have been enrolled in that capacity, and all sorts of information services have been provided as a consequence. There has been much criticism. The major criticism has perhaps been that so many of the suppliers appear to have been offering pornographic services of one kind or another, and there does not appear to have been a decent control over the kind of people offering this sort of service.
Another criticism has been about the pricing provision. The premium calls are charged at the same rate as calls from the Republic of Ireland into the 1037 United Kingdom. That is the highest rate possible for any call in the British Isles. It is possible for the charged rate to be as much as 40p per minute in peak hours. When some of the services were first inaugurated they were advertised without any indication what the prices were and others were advertised as being at M-rates. I do not know what "M" stands for but it means what I said when I was speaking about the Republic of Ireland rates.
As a result of discussion and criticism, a code of practice has been drawn up in conjunction with the newly-formed trade association which has been set up to cover what are called "providers of telephone information and entertainment". The code of practice provides that the contractors should advertise the fact that their charges are at this very high rate, M-rate, but what has happened is that many contractors advertising the services have put in in very small type alongside their often quite attractive advertisements that these are the rates, but without explaining what the rates are and what they mean in concrete terms so that ordinary people can understand. In this case, the code of practice does not appear to have gone far enough and particularly has not provided that the contractors should, at the beginning of any call, explain what the charges will be so that people will know before they begin that if they stay long with a call their charges may be £11 or £15 for the single call they are making.
It is clear from this example that codes of practice could be drawn up. Even though they were under the supervision of the Government, it might be possible that what was required on the part of the contractor was not quite clear and in changing conditions in the market the code of practice could quickly go out of date. On a subject such as this it is difficult to lay down what a proper code of practice should be. In my submission it would be far better if the codes of practice were welcomed as guidelines, but the courts could go behind the codes of practice if that was the right thing to do to secure justice. The courts ought to be able to take account of the whole Act and the general intent of the legislation and not be bound, as provided in Part III, by the absolute defence given to contractors who abide by a code of practice that has been drawn up on their behalf but approved by the Government. This example I hope will make it clear how difficult it will be to rely as fully as the Government appear to be doing on codes of practice drawn up in conjunction with industrial interests.
I return to where I started. I join heartily with all those who have spoken on behalf of this Bill. Perhaps we are so strongly in its favour that some of us feel what a great pity it is that the Bill is not stronger in certain important respects. We hope that during the course of the debates the Government will, in responding to the warm all-party spirit that has been shown here today, show themselves to be reasonable in the concessions and changes they are prepared to accept.
§ 6.54 p.m.
§ Lord Denning
My Lords, I, too, welcome this Bill and thank my noble and learned friend the Lord Advocate for the way he has introduced it. I sketch just for a moment how the law has developed in this field 1038 of product liability. In the last century, right up to the year 1932, the manufacturer who sent out goods for sale to all his customers was not liable for his negligence. Negligence had not then developed as a tort. The person who had been damaged by the defective article had to sue the seller of it by contract. He could not sue the manufacturer in negligence.
That was all altered by a case coming from the United States and developed judicially in this House in 1932, when a manufacturer of ginger beer bottles issued them throughout the country through the shops. One was bought in a shop in Scotland and handed to a friend who drank the ginger beer. Inside the bottle there was a snail. The lady who drank the ginger beer was rendered ill. According to the law as it then stood, the manufacturers were not liable even for their negligence. Two Law Lords said that was still the law, but the majority in a celebrated judgment developed this tort of negligence and manufacturers were made liable for negligence in sending out defective products. That is how the law developed and is the primary rule that the producer shall be liable for damage caused by a defect in his product. From 1932 onwards we had this law. In nearly every case the injured person succeeded against the manufacturer because if there was a defect prima facie the manufacturer was negligent and therefore liable.
Then there were the thalidomide cases: ladies took thalidomide to have a rest during pregnancy. They had deformed children. They sued the German or Swiss manufacturers through the courts here because this was a defective product which was made and distributed. They said: "But we were not negligent. We had been testing this beforehand on rats, mice and even on some ladies and there was never any trouble. As soon as we found any trouble we withdrew it".
There was a similar case later in the courts involving a product called Primados. It was the same sort of thing. The manufacturers had tested it as much as they could, they put it on the market and claimed that they were not negligent. If those cases had succeeded in negativing negligence they would have got away with it. The cases would have taken months and the expense would have been enormous in both of them. Thalidomide was settled; the defence was never proved; and the Primados case was settled as well.
Therefore we have this position, that in law, if the defendant can show he was not negligent, he gets away with it. It is that state of the law which should be altered. When a manufacturer sends out a defective product that injures people it is right that he should be liable and should not get away with it by saying "We were not negligent". The manufacturers should warrant the safety of the product they send out. That is what the Royal Commission of Lord Pearson over four of five years recommended—strict liability on the manufacturer.
That brings me to the directive. One can tell by the framing of it, and your Lordships will know, that it was statutorily approved unanimously by the representatives in Brussels when the directive was suggested. There was obviously no agreement between the Nine, nor perhaps when there were Twelve member states, about what the law should be. So they had this compromise, that they allowed each member state to decide for itself. Let me read the provisions of the 1039 directive that apply to both the points, both the agricultural point and the other point of the development risk. This quotation concerns the agricultural point:Whereas, since the exclusion of primary agricultural products and game from the scope of this Directive may be felt, in certain Member States, in view of what is expected for the protection of consumers, to restrict unduly such protection, it should be possible for a Member State to extend liability to such products;So that they say that member states can extend them to these agricultural products and fisheries, if they like. That is one point: to leave it to the member states to decide.
The other point about the defence I had better read in full from the directive:Whereas, for similar reasons, the possibility offered to a producer to free himself from liability if he proves that the state of scientific and technical knowledge at the time when he put the produce into circulation was not such as to enable the existence of a defect to be discovered may be felt in certain Member States to restrict unduly the protection of the consumer, whereas it should therefore be possible for a Member State to maintain in its legislation or to provide by new legislation that this exonerating circumstance is not admitted"—and so forth. It can be done.
In each case it is quite clear that there was a difference of opinion between the member states as to what the law should be on this matter and they said that each member state, in a way, could decide for itself. We could decide for ourselves whether or no agricultural products and fisheries are to be exempt or whether this defence should be allowed to manufacturers. So each member state can decide for itself.
No doubt that will be subject to much discussion in this House at Committee stage. Let me just say that we get mention of fisheries in our own provisions, where it says:in respect of any defect in any game or agricultural produce if the only supply of the game or produce by that person to another was at a time when it had not undergone an industrial process".If that kind of provision remains, it would give infinite scope for litigation and argument all the way through. It is difficult enough to know about agricultural produce but what is an industrial process? One of the strongest arguments about putting that in is that it is so vague and uncertain that it will give rise to all sorts of litigation. It would be better to have it out altogether.
Then, about this defence. There it is, the difference of opinion between member states. Are we to allow this defence of development risk which then will lead to all such arguments as did, and will, arise in the case of thalidomide and in Primados. Better get rid of all those arguments; better to have the strict liability if there is a defect which is proved to cause damage in the consumer or the customer.
Insurance is taking care of far more difficult positions than this. We need not trouble about the Americans with their exorbitant damages and the like. They have gone haywire about it with their contingency fees, their damages settled by juries and so forth. We need not worry about them. I do not think that Lord Pearson's commission worried, and I do not think that we should worry. The insurance market is well able to cover a risk of this kind. So, subject to those qualifications, I would welcome this Bill and 1040 look forward to the discussions which we shall have later on in Committee.
§ 7.5 p.m.
§ Lord Clitheroe
My Lords, I have great hesitation in speaking after so many wise and learned noble Lords have spoken already this evening. The Bill before the House is a very important piece of legislation, and if and when enacted will affect many areas in a far-reaching way, not least the chemical industry, which is of particular interest to me. Indeed, I should declare an interest as a director of a company with substantial international chemical interests and activities.
I seem to be slightly lonely today beause there has been a great deal of talk, as one might say, on the issues of the consumer. Indeed, it is the consumer who is being attended to in this Bill today. But the general effect of this legislation will impose new and very heavy liabilities on manufacturers; and while it would be wrong to argue that there is no need for further protection for the consumer their is always a risk that in redressing a balance it is easy to over-compensate and to create another imbalance which is even more undesirable than the first.
I shall not burden your Lordships with a long dissertation on the situation in the United States, of which I have considerable experience. However, I can say that the scene there is now chaotic and heavily loaded aganst the producers; that insurance capacity is limited; that in some areas there is no capacity in existence and that the distortions—fortunately we do not have these distortions in this country—of their legal system are so great that their imbalance will just have to be corrected before long.
The effective cost to the consumer in that country is now apalling and the only gainer is the ambulance—chasing attorney. I do not suggest to your Lordships that the current Bill will have this effect but there are certain aspects of it which require careful scrutiny to ensure that the Bill achieves its objectives wihout creating undesirable effects. It is a very complicated Bill and is not made easier by the interrelation with the implementation of the European Community's directive.
For instance, it is implicit in the Bill that the product liability provisions extend to cover accidents in the workplace caused by defective products. That is not required by the directive and moreover would create unnecessary confusion due to the overlapping requirements of two pieces of primary UK legislation. In dealing with specific issues, I am afraid that foremost we come again to the importance of the legal defence concerning the state of the art of scientific and technical knowledge or the development risk defence, as it has now apparently become.
That is covered, as we know, in Clause 4(1)(e), and although the drafting of this simple paragraph is complex it is a vital part of the Bill if British industry is not to be inhibited from producing and marketing new and innovative products. Developing a new product inevitably carries a large number of commercial risks for the producer. If, in addition to those risks, he has to face unquantifiable liabilities and law suits arising from problems which could not have been foreseen at the time the product was sold, he will be unwilling to invest in research and development in the future.
1041 I can tell your Lordships that that is now happening in the United States. Our industries will suffer and the consumer will suffer, as indeed will the nation as a whole. Looked at in another way, if, after this legislation is enacted, the producer were not able to use the development risk defence, would he not be subject to the same kind of unreasonable liability that anyone suffers when retrospective legislation is introduced? There is always in your Lordships' House a deep and legitimate suspicion of retrospective legislation, where one cannot defend oneself by demonstrating that at the time an action was taken there was no reason to think it unlawful. If one cannot argue that defence, the situation seems to me intolerable. I cannot emphasise too strongly that the state of the art defence is absolutely essential and I am glad that the Bill includes that provision.
A second issue relates to the financial limits on liability. I have already touched on the circumstances with which industry is faced at the moment. Even with the inclusion of the state of the art defence, there will be many cases where the producer has no position from which he can defend his case. The increasing problems he is already faced with in obtaining insurance are growing rather than receding, and industry will face not only excessive premiums but also a serious shortage of capacity.
I know that runs contrary to what some of your Lordships have said today in talking about the insurance world; but I can only say from experience that the problem of running short of insurance capacity from a producer's point of view is horrendous. You cannot get it, no matter what premium you pay, and if you find the position is going to be one where you cannot get insurance the consumer will not be happy with that in any way at all. I suggest that adequate cover is not available even now, and that is before insurers have concerned themselves with the increased risks of strict product liability. I recognise there are practical difficulties, but some of those difficulties should perhaps be overcome and have been overcome in other countries.
I do not wish to extend the time I am taking, but I should like to touch on one further point; that is, that the Bill perhaps does not satisfactorily cover the concept of reasonableness. That is crucial to the viability of the Bill.
§ Lord Williams of Elvel
My Lords, I am sorry to interrupt the noble Lord, but did I hear him aright when he said that insurance cover was not available even under the present system?
§ Lord Clitheroe
My Lords, I think I said—certainly I intended to say—that adequate cover is not available even now. I repeat, "adequate cover"; and by that I mean cover that carries all the various steps. I am not an insurance expert, but you take various stages of risk and adequate coverage, I am told, is not available.
Perhaps I may refer to one other point. We do not know when the Bill is going to be implemented, but I would suggest that both industry and the insurance world need adequate time in which to get their act together. Documentation and recording systems, changes of terms of procurement and sales contracts are some of the things that have to be done by producers. Insurers must have time to prepare terms 1042 and conditions to address the new product liability regime in an orderly manner. It is difficult to believe that that can be achieved in under 12 months. Furthermore, if we implement this legislation substantially earlier than other member states of the Community we shall be putting ourselves in an undesirable competitive position. Would it be possible to time the implementation of at least Part I of this Bill to coincide with the requirements of the directive?
Finally, arising from the complexity of the Bill, I think it would be helpful, in view of the different effect it has on different industries, if Ministers would see fit to entertain further consultation during the further progress of the Bill through this House.
§ 7.15 p.m.
§ Lord Morton of Shuna
My Lords, as I am one of an increasing number of those who welcome this Bill, my contribution is not going to be to say how much I welcome the Bill but to raise a series of questions. I have no doubt that the noble Lord who is to reply for the Government will have the answers at some time or other, even if not necessarily this evening.
First, the question of the level of awards of damages in America has been raised. This question appears, to a Scottish lawyer, to relate very much to the fact that awards for damages in America seem to relate not to the loss or damage actually suffered but to the defender's ability to pay and also to the contingency fees. My noble friend Lord Williams of Elvel suggested that this might be coming into Britain. I can assure him that, so far as Scotland is concerned, if that is liable to arise we have not heard of it yet and we shall resist it with all endeavours possible.
On the Bill itself, Part I is intended to give effect to the directive. Would it not be convenient for the consumers who have to deal with this Bill to print the directive as a schedule to the Bill, say, so that one gets the two documents together? In the directive, as I read it, we start off with the Council of the European Communities; then we have four articles to which they have regard. Then there are 19 paragraphs, which start off with the word "Whereas" and then after that beginning it says "has adopted this directive". And what follows is the directive.
When one considers the agricultural provision, what the directive talks of in Article 2, quite apart from what is in the paragraph that has already been referred to, among others by the noble and learned Lord, Lord Denning, are not industrial processes at all. It says,'Primary agricultural products' means the products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing".Would it not be better for the Bill to use the same words as the directive, or do the Government seriously consider that "initial" and "industrial" mean the same thing? Surely it is the articles of the directive that have to be complied with rather than the preamble.
The second point of conflict is rather more fundamental. In Clause 5(2) of the Bill we read:A person shall not be liable under section 2 above in respect of any defect in a product for the loss of or any damage to the product itself"—so far so good—or for the loss of or any damage to the whole or any part of any product which has been supplied with the product in question comprised in it".1043 That appears to me to mean that, if I buy a car battery and it causes damage, I cannot get compensation for the loss of the battery iself but for what the battery has done-unless I buy a car which has a defective battery in it. Then if the battery causes the car to be destroyed, according to Clause 5(2) I do not get any compensation for the car either.
If one turns to Article 9(b), that seems to be completely different. It says:'damage' means:… damage to, or destruction of, any item of property other than the defective product itself, with a lower threshold of 500 ecu".There is nothing there about what the product is built into and I should be interested to know why the last three lines of Clause 5(2) are there. They seem to be slightly contrary to the directive and to take away a lot of the protection the directive is designed to secure.
The next question I have is one of jurisdiction. If a person in Britain suffers damage due to a defective product which was produced in or imported into another member state first, can the person who suffers damage sue in Britain or is that person required to go to Greece or Portugal in order to sue? It is obviously grossly inconvenient if I, with my defective battery, must raise the action in Portugal or in Greece. The producer or the importer is presumably insured for product liability, so it will be much more convenient if the consumer can sue in the country where the harm happens.
That raises the question of whether product liability under Part I of the Bill is a tort, a delict or a quasi delict. As far as I can see, that is the only way in which there would be jurisdiction under the Civil Jurisdiction and Judgments Act 1982, which adopted the 1968 EEC Convention and which states:A person domiciled in a contracting state may in another contracting state be sued in matters relating to tort, delict or quasi delict in the courts of the place where the harmful event occurred".Is the liability a tort, a delict or a quasi delict? As a Scot, I am very much happier with a delict or a quasi delict. However, by the look of the noble Lord, Lord Lucas, he is much happier with a tort!
The directive and the Bill impose a liability for a defective product. However, there is no question of fault or a duty to take care. The preamble to the directive makes it clear that this is liability without fault. Until recently, the whole history of tort, delict and quasi delict in English and Scottish law has been tidied up with fault, wrongs, breaches of duty and the need to prove a breach of duty. For example, the Factories Act provides that machinery shall be securely fenced and lays the duty of doing so upon the occupier. There is no duty laid on the producer of any product not to produce a defective product. There is only a liability if he does so.
One need only look at Clause 6 of the Bill to see how it deals with other wrongdoers. The Fatal Accidents Act refers to "the wrongful act, neglect or default". The Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 makes the contribution of "joint wrongdoers" and refers to "negligent or wrongful acts or omissions" and not, as printed in Clause 6(1)(b), to "act or omission".
1044 We then proceed to the Congenital Disabilities (Civil Liability) Act, which, in its Long Title, deals with children who are born disabled as a consequence of some person's fault. We also have the Law Reform (Contributory Negligence) Act, which speaks of fault. Is this supposed to be fault or not? As the Government know, the civil jurisdiction Act is supposed to refer to the report of Professor Schlosser on jurisdiction. His passage dealing with tort, delict or quasi delict begins at paragraph 134 by stating:It presupposed that the wrongful act has already been committed".Is this, in the Government's view, a tort, delict or quasi delict? Such an animal could be defined as a liability to pay damage for a loss which arises from law and not from private agreement. The difficulty would be solved. That definition would fit with the Damages (Scotland) Act 1976, which speaks of,an act or omission giving rise to liability to pay damages",and does not mention fault or wrong at all. It would also fit in with the statement of the noble and learned Lord, Lord Denning, who said in 1949:The criterion of liability in tort is not so much culpability but on whom the risk should fall".I would suggest that is the modern approach which should be used in the law of delict. However, that is not the way that all judges and all lawyers will approach the problem. Ought the Bill not to provide that liability under Part I is a tort, delict or quasi delict?
There are several Scottish problems about the proscription and limitation provisions in Part I which I do not propose to deal with now. I hope, as the directive imposes a 10-year limitation and a three-year limitation onto the already existing limitations of other periods, that the Law Commissions in both Scotland and England will be given an opportunity to look at them and to perhaps drop the other periods of limitation and go for the three-year and 10-year periods.
The next question I have concerns whether or not the Government think that Part II of the Bill really fits in with Part I. Clause 10(4)(b) gives the retailer a defence which I believe the noble and learned Lord the Lord Advocate has already read out to us. That defence concerns having no reasonable grounds for believing that the goods failed to comply with a safety requirement. This defence is open to no one other than a retailer. If I buy my battery from a retailer and he says' "I knew nothing about it", and then tells me who the wholesaler was, the wholesaler has no defence. That does not seem to fit in with the view of product liability which says that one returns to the producer of the product.
Why is it necessary in Part II of the Bill to have a definition of consumer goods which is different from the definition of product in Part I? What is the purpose of the forfeiture provisions outlined in Clauses 15, 16 and 17 where forfeiture takes place without any prosecution? In what circumstances is this power intended to be used? To take the Scottish example, how is the sheriff to be satisfied that the goods have to be forfeited? Is the criterion to be proof beyond reasonable doubt?
1045 I suggest that there may well be a case for a power to seize and retain goods pending a prosecution. But it seems strange that we are adopting what is almost a mediaeval process, in which we seize goods, do not prosecute anyone who owns or possesses the goods and then destroy the goods. That seems to be the power which is referred to. It seems rather odd to me that we are simply destroying goods without punishing anyone.
In Clause 15 regarding a court and suspension notice, there is a right of appeal. That appeal is to the Crown Court in England and to the County Court in Northern Ireland. Why is there no provision for a right of appeal for a dissatisfied person in Scotland? It would seem appropriate that there should be such a right of appeal, as it seems to have been omitted.
Clause 39 provides a due diligence defence. Would it not be simpler, looking at Clause 12(4), simply to say that a person who makes a false statement is committing an offence but that the due diligence defence is open to him? It would avoid the terrible minefield of "recklessly" and "material particulars". What is the point of changing the approach to this?
Lastly, perhaps I may raise the question of the offences. Clause 38 provides, among other things, that an enforcement officer who obtains trade secrets and who gives them away can be sent to prison for up to two years. That seems quite appropriate. However, if someone pretends to be an enforcement officer, whatever he does and even if he obtains the trade secrets (which may be why he has pretended to be an enforcement officer), he faces a maximum penalty under Clause 38 of a fine on level 5. It seems to me that he should possibly be punished more than the other.
I have spoken for too long. The Bill is very much to be welcomed; but, as a last point, is it really necessary that the House should approve the wording of Clause 2(6), which says:This section shall be without prejudice to any liability arising apart from by virtue of this Part"?That seems to have been written by a scriptwriter for "Yes, Prime Minister". Surely there is some method of putting it into simpler English that can be understood; but otherwise I give the Bill a great welcome.
§ 7.30 p.m.
§ Viscount Hanworth
My Lords, before discussing the provisions of product liability in this Bill I should like to take a rather wider and philosophical view of the problem. This is because we ought to consider the longer term implications and try to decide how and to what extent consumer protection and compensation should be extended in the future.
There can surely be no doubt that the present system is anomalous and, to say the least, very unfair in many areas. The classic example is that if a person is seriously injured in a car crash nothing can be claimed unless the driver can be proved to have been negligent. Yet in industry, even if the worker is largely to blame, say, by removing safety guards from a machine, some compensation is payable.
Such problems were highlighted in a very emotional atmosphere about brain damage from whooping 1046 cough inoculation. If a child gets brain damage as a result of inoculation there is now compensation, but for those who are not inoculated the chances of contracting whooping cough and as a result getting brain damage are equally likely, and the effects just as devastating. For them there is no compensation. I know that in the past there was considerable pressure for inoculation, partly on the grounds of national good, but this argument is very thin and does not justify ignoring the sufferings of those for whom no compensation is payable.
Again, in the medical field it must be recognised that any useful drug will have an unfortunate effect on a small number of people allergic to it. Even aspirin can cause serious internal bleeding and other side effects. Do we accept that if a drug is passed as safe by the "drugs committee" no compensation is payable? Are we going to allow a host of vexatious cases against physicians who administered a strong drug, allegedly without adequate supervision? We shall have to face these questions at some time in the future.
This leads on to another point. It is idle to suppose that everyone can obtain his rights by litigation. The delays in so doing are very great. For the rich and the poor this may be possible; the latter because of legal aid. For me and for many others this is not so. In America solicitors can take on a case free, say, for 50 per cent. of the damages if they win. In England this would be maintenance and champerty—and I am not quite sure which of those two it is. The American system leads to almost vexatious litigation.
We must be quite clear that no fault compensation is an insurance policy for which someone has to pay, and who does so is a vital point. In the case of this Bill the consumer will pay in the increased price of goods, but it will greatly sharpen up the manufacturer's control. Moreover, it has often been impossible in the past to prove a manufacturer's negligence. I entirely support the provisions of the Bill.
I very much hope that your Lordships will agree that if, as I think likely, we move in the direction of no fault compensation, perhaps even for non-attributable accidents in the home, we shall do so with our eyes open and always consider the side effects and the cost of doing so. Of one thing I am certain—we do not want to allow the situation which has developed in America where, for example, damages are so substantial that 30 per cent. or more of doctors' fees are due to the cost of their insurance policy. Even for agricultural machinery Massey-Ferguson estimates that the cost of insurance represents 7 per cent. of the sales price of its farm equipment.
If noble Lords have followed my argument and agree that in many cases compensation is an unfair lottery, and if noble Lords want to extend compensation to people in need, then I am sure that in fairness to everybody there must be a limit to the compensation awarded. Such a limit is envisaged in the EC legislation, and although it is new to our law most insurance companies put an upper limit on all sorts of claims. I suggest that in part and based on negligence we are in danger of becoming prisoners to our legal system which to some extent, because of new developments, is becoming out of date. We need to rethink this. To those interested, the Pearson Royal Commission of 1978 provides a very good analysis of 1047 the situation—but pigeonholed like so many other excellent reports.
At last I return to the provisions of the Bill. One very important issue is whether we allow the provision of new developments being a defence for the manufacturer. As has been said this evening, such a defence gravely undermines the ability of an injured person to claim compensation. Having read the consumer council brief and understood that several other European countries have thought that this loophole should be closed, on balance I now agree that the provision should not be in the Bill. In parenthesis, it always appears to me rather strange that we seem to pay so little attention to the experience of others in Europe and do not listen to what they have to say about the various issues that confront us today.
§ 7.37 p.m.
§ Lord Auckland
My Lords, the great and late Sir Harry Lauder once wrote a song, "Keep Right On to the End of the Road". In consumer legislation we have been seeking to do this for many years, and here, I think, is a Bill which gives the ultimate challenge.
Since taking my seat in your Lordships' House about 28 years ago there have been some 10 Consumer Protection Bills which have become Acts. This is the most challenging of them all because it poses to a great extent the dilemma between the consumer and the manufacturer. Like many of your Lordships, I have one or two small interests to declare, all of a non-financial nature. I am an honorary vice-president of the Royal Society for the Prevention of Accidents. The society has a considerable interest in this Bill, in particular, as has been mentioned, in regard to toys and other products and mechanical instruments which will be covered in certain clauses.
I am also president of the Institute of Insurance Consultants and I have spent on and off some 30 years of my working life in the insurance industry. I was especially interested in what was said about product liability, because I seem to remember that even in the late 1940s insurance against product liability was not an easy matter, particularly of course in the United States of America. Even there malpractice and workers' compensation legislation and other offshoots of product liability resulted in the most enormous claims. However, not being a lawyer, I certainly do not propose to chase that hare at this time of the evening.
The great challenge that this Bill will present undoubtedly concerns the enforcement procedures. When we look at product liability and the thalidomide and Debendox cases—to name just two from the pharmaceutical industry—there is, on the one hand, the fact that no manufacturer can ever guarantee perfection on the testing of a product. On the other hand, the mother or father of a child who has been brain damaged, or otherwise damaged by thalidomide, Debendox, or any other product, must also be considered because, of course, no compensation, however much, can make up for the hurtful loss of a young life.
As regards retailing, there is the question of the small trader and the supermarket. The small trader has a great deal on his plate when it comes to studying 1048 the law and what is required under the Bill regarding products. The supermarket or the large trader may well have the time and staff to devote to studying the legal implications. I hope that aspect can be considered very carefully as the Bill goes through Parliament.
Then there are the existing situations. I refer, for example, to labelling. Under recent legislation the requirement to label products properly has become a reality. In a case arising from a defective product where the labelling has been adequate, will we find that the manufacturer or producer is guilty?
Obviously, the most important people to be considered are children and old people. In consumer legislation in the past various Acts have covered this point. Mention was made of toys, particularly by the noble Lord, Lord Williams of Elvel. So far as I can make out, this proposed legislation seems to neglect that aspect. Toys can cause a great deal of damage. There are still a number of toys—teddy bears, and so on—where the eyes are not properly secured. Here, it seems to me, is a really comprehensive Bill which could deal with that dilemma.
Finally, the Bill itself suffers from the defect of so many Bills in that it is somewhat over-long. I refer, for example, to Schedule 3, paragraph 1(10) which deals with the Health and Safety at Work etc. Act 1974. For the words "properly used" there is a new subsection consisting of 140 words. Is that really necessary? After all, those who have to study this Bill and those who are going to be affected by it, whether manufacturers, retailers or consumers, do not want too much verbosity.
I mention this only because, apart from that, I believe this is a workmanlike Bill. In its various stages through your Lordships' House—and I believe there is much tidying up work to be done in Committee—one of the aspects we must look at is the drafting, particularly in the schedules. In order that this very wordy Bill can be made to work properly it must, in some parts at least, be in a comprehensible form.
§ 7.45 p.m.
§ Lord Ezra
My Lords, we have now reached the closing stage of this debate on the Consumer Protection Bill. I believe that two issues have clearly emerged. The first is the virtually unanimous support for the objectives and the purposes of the Bill. The second is I think an equal degree of agreement on the particular issues which still require attention; on not all of which are we of the same opinion. What the debate does portend is a very important Committee stage, for which I hope we shall be given sufficient time.
I should like to mention some of the particular issues raised during the course of this afternoon's debate which accord with my own view as to what are the important issues. I start with product liability, on which so much has rightly been said. The question of the development risk defence was expected to be raised; indeed, it achieved a great deal of consideration. The fact is, as we have been advised and and as we know, that most of the countries in the European Community which have applied the directive so far have not given this exclusion. Certainly 1049 that is the case in France, Belgium and Luxembourg, and in West Germany it has not been allowed for pharmaceuticals.
It has been argued that the insurance liability arising from not allowing this defence would be substantial and could even be stunting; but among the many briefs which we have all received is one from the Association of British Insurers which gives a somewhat different view of the situation and which has already been referred to in previous speeches.
In effect, what it says is that if this defence were not allowed, and therefore had to be insured against, the impact, for the most part, would be minimal. In some cases it could be more extensive but with a very few industries, and I am quoting their words, which have a heavy development risk, such as pharmaceuticals and aerospace, the difference could be critical and the amount of capacity would be reduced. Therefore here the insurers, at any rate, are putting this matter into perspective. What emerges is that two, or possibly three, major sectors where there are considerable risks attached to development could be seriously affected. I wonder whether we would be justified, because of that, in having a total exclusion in allowing this defence to be applied.
In passing, I should like to draw attention to the Accident Compensation Law of 1974 introduced in New Zealand, which in a rather unique manner covers these problems. In sectors where the risk is very large and where it would be unfair to put it either on the consumer or on the manufacturer—for aspects could not be envisaged at the time of manufacture—could not some other way be found, funded in a suitable and generalised manner, to cover these risks? That seems to me to be one possibility that is worthy of consideration in this difficult issue.
The other aspect of Part I of the Bill concerns the question of the exclusion of agricultural products. As the noble Lord, Lord Morton of Shuna, has pointed out, in the Bill the basis for the exclusion is worded differently from that in the directive. The Bill refers to products which have "not undergone an industrial process" and the EC directive refers to "initial processing". Whichever way it is described, it is quite clear from the remarks of the noble and learned Lord, Lord Denning, that a great deal of confusion will arise in the courts. It is very difficult for anybody to envisage that any natural product now reaching the market has not gone through some form of initial processing, if I may use the EC term. Indeed, so far everybody has benefited from it.
I am most impressed with the increased quality of the foodstuffs that we buy in stores such as those presided over a few years ago by my noble friend Lord Sainsbury and his competitors, and this has all been to our advantage. There has been an application of new technology to achieve this improved quality, but it would be very difficult to argue that there has not been some degree of processing, which is what we are discussing. I believe that the Government should explain a little more clearly how they see this problem being coped with and whether in all these circumstances this exclusion is desirable.
We have heard it said that there is already a great deal of legislation affecting agricultural products. If the 1050 effect of all that legislation (the 19 Bills referred to by the noble Lord, Lord Stanley of Alderley) is precisely as though these products were not excluded, I think we all ought to know. In any event, I think it is wrong in a Bill of this importance for that point not to be clearly brought out. This Bill is meant to be one of the most important pieces of legislation for consumer protection. The way in which it is worded suggests that these products will be excluded from all forms of legislative control, whereas the facts are different, as we have been informed. So I suggest that that point also should be looked at.
When we come to Part III there are also some interesting points that have been raised which require further clarification. This section introduces a general duty on manufacturers, importers and retailers to supply safe goods, which is a wholly desirable statement of intention. However, it raises the question of standards of safety. It is not entirely clear which standards would be applied in which cases. It raises the question of who is responsible for testing to see whether the standards have been achieved.
I have received advice from the Trading Standards Association, of which I am a vice-president, to the effect that it believes that the impact of the wording of this part of the Bill would be to leave the onus of proof on the trading standards officers; namely, that it would be for them to prove that the goods were unsafe rather than for the trader or manufacturer to prove that they were safe. If this is the case perhaps we ought to be advised. However, it seems to me that standards and the question of where the responsibility lies for testing in order to ensure that these standards are achieved must be clearly identified.
Then there is the question of second-hand goods, which have been excluded. Consumer bodies have expressed much concern about this matter. The fact is that here too there is other legislation which lays down rules about certain types of second-hand goods; namely, electrical goods. I should have thought that further clarification was required here. I believe that those who sell second-hand goods which are potentially capable of causing harm or injury should carry some liability and therefore they should see to it that those goods are unlikely to cause difficulties.
As the noble Baroness, Lady Fisher, pointed out in her contribution to the debate, it is a little surprising to see that exports have been excluded; all the more so as that seems to conflict with the Government's recent paper on quality standards and international competitiveness. To me it seems odd that while apparently we proclaim that the British public should have goods which are safe, we do not really mind about the standards of safety of the goods that we export to our friends, say, in the EC. I should have thought that at least we ought to include the other countries of the Community and apply there the same degree of attention to safety that we apparently want to be applied to goods sold in this country.
Turning now to Part III, here again it is wholly desirable to make the indication of misleading prices a general offence; but it has been represented to me that the wording of this part of the Bill is complicated and questions have been raised by many noble Lords about the problem of the code of practice. Indeed, there is a 1051 basic anomaly about this code of practice because apparently it is intended that compliance with the code will provide an absolute defence but that non-compliance will only be taken into account. Surely it would be proper to reconsider the whole issue of the code of practice in relation to the legislation.
I believe that it was suggested by the noble Lord, Lord Gallacher, that perhaps this question should be examined in more depth to see which parts of the code of practice could be introduced into the legislation, and therefore be mandatory, and which parts could be left in the code of practice and have the same impact, as the noble Baroness, Lady Elliot, said, as the Highway Code; namely, to be taken into account.
The other aspect of the code of practice which has aroused concern and to which reference has been made is that the Secretary of State may be authorised to agree other codes of practice. It seems to me that this introduces a major element of confusion. What will be the validity of these other codes of practice? Will they have the same validity as the code of practice issued by the Government—that is, to provide an absolute defence—or will they be of a more voluntary nature? It seems to me that such a provision weakens the impact of that part of the Bill.
In regard to Part IV, I believe that it is absolutely right that the enforcement of these important regulations should be placed on the shoulders of the weights and measures authorities in Great Britain and the district councils in Northern Ireland. However, as the noble Baroness, Lady Fisher, pointed out, here again there is an element of confusion because it is stated in Clause 27(2)(a) that the Secretary of State can transfer responsibilities for enforcement to third parties. How will this transfer be effected? Who are these third parties? How will they stand in relation to the weights and measures inspectorate and the local authorities? I think that these are very obscure matters which no doubt the noble Lord, Lord Lucas, will clarify when he winds up the debate; or perhaps they will be clarified when we come to the next stage of the Bill.
Finally, I turn to the question of resources, to which other noble Lords have also referred. I must say that I was a little surprised to read in this Bill that:There are not expected to be any implications for public expenditure or public service manpower".I fail to see how that can be so. We are extending the scope of consumer protection. That is the whole purpose of the Bill. We are extending the obligation for the safety of goods produced in this country way beyond the scope of present legislation. A large number of manufacturers and traders will need advice and they will turn to the weights and measures inspectorate.
In conclusion, I should like to say that this Bill, which has excellent intentions, could be much improved by reconsideration of some of the matters that have been raised during this debate. Above all, do not let us attempt to bring the Bill into effect on the cheap.
§ 8 p.m.
§ Baroness Nicol
My Lords, as the noble Baroness Lady Elliot, said, this is not a political Bill and I hope that it will not be turned into one as we go through its various stages. As the debate has shown, all of us, with the single, notable exception of the noble Lord, Lord Airedale, who wants none of it, support the Bill. I am sure that the noble Lord has good reasons.
I do not propose to go over Part I of the Bill. In the words of the song, I think,we have gone about as far as we can on thatfor a Second Reading. It will be discussed in Committee. I am sorry to disappoint the noble Lord, Lord Stanley. It is obvious that he will have to come armed with full details of his pieces of legislation and fight his case there.
We welcome especially, as almost everyone has today, the general safety requirement. We feel that it should lead to improved standards at all levels. The noble Earl, Lord De La Wan, disappointed me by saying at the beginning of his contribution that this was not a Bill to change commercial behaviour. I should have thought that it was just such a Bill. If it does not do that, then it has failed miserably. I hope he did not mean what I thought he meant. His fears that public expectation will be too high are surely unfounded. Public expectation has every right to be high. The Government are fully behind this Bill, so that the public can be better protected. If their expectations are high it will not be the result of Opposition rhetoric as he feared, but of the plain facts put before them by the Government.
The question concerning the BMW anti-skid device is covered by Clause 10(2)(b). If the noble Earl cares to read that clause, he will find it meets his question about increased costs.
§ Baroness Nicol
My Lords, I am sorry, but the noble Earl did rather give me a pounding on sewage sludge, so I felt I owed him that.
We particularly welcome the general safety requirement at Christmas time. A number of noble Lords have mentioned toys. The noble Lord, Lord Auckland was concerned about this matter. A number of unsafe toys are still about. I am indebted to the Consumers Association for telling me about quartz chippings coated with explosive, wrapped in paper. When snapped in the fingers, they explode. I understand that the force is great enough to blind a child close enough to it.
Perhaps I can mention also the matter of the Mexican ovens which are lethal toys. They were first sold on Epsom racecourse, I understand, although I make no special point about that. Many of these toys are still about. There is also the Jack-in-the-Box which, when released, has sufficient force to knock a child out. Such items need to be controlled. We show, by this Bill, that we care about the situation.
The welcome given to the Bill by the Consumers Association and by the National Consumer Council is significant. Both have been working for improvements 1053 of this kind for some years. It must be some consolation to them to see what is happening now.
I am trying to avoid ground that has been thoroughly covered. I must, however, mention standards again. In his opening speech, the Lord Advocate drew particular attention to the role that standards would play in this Bill. It is true that the success of the new Act, as it will be, will depend to a large extent on the quality of the standards which are set. We must question them as did the noble Lord, Lord Ezra, and ask, "Who sets the standards, and who approves them?" This is not clear from the Bill. It seems that almost anyone can set a standard which then becomes an important defence. It becomes one of the circumstances to which traders must have regard in abiding by the general duty. Therefore, it is of the utmost importance that the standards should be credible. Should the Minister be unable to answer that now, perhaps he can write to us before Committee, as I think it will affect some of the amendments which we may wish to bring forward. Can he also clarify the relationship between standards and regulations, which again is not clear?
Goods for export have been mentioned by the noble Baroness, Lady Fisher and by the noble Lord, Lord Ezra. Both stated eloquently the view that we, on this Front Bench, hold. We are opposed to the exclusion of goods for export from the general safety requirement. We reiterate that goods which are not considered safe for the United Kingdom should not be exported, or re-exported, without the knowledge and consent of the appropriate authority in the receiving country. This is known as prior informed consent. It is a principle which we tried to introduce into the pesticides legislation and failed. I hope that we will not fail to get it introduced into this Bill. It seems morally dubious to take the attitude that has been adopted towards exclusion. In the long term, it cannot be good for the image of the United Kingdom. The Association of County Councils and the Consumers Association have put forward this view. We hope to persuade the Government to take a fresh look.
The noble Baroness, Lady Elliot, expressed concern, as did the noble Lord. Lord Ezra about second-hand goods. We are concerned that second-hand transactions are excluded from the general safety requirement. We understand that it may be difficult to include sales between private individuals. However, there seems no reason to exclude second-hand business sales. A great deal of potentially dangerous material—for instance second-hand gas cookers—is sold, as mentioned by the noble Baroness, Lady Elliot. Gas showrooms often have them on display. Are we to say that they are not subject to the same safety requirements as new cookers? An unsafe product, sold to one customer but then returned and accepted back by the trader, can be resold to another customer as second-hand. The trader would thereby escape the safety provisions. This cannot be the Government's intention. We shall be seeking to change that in Committee.
The Consumers Association reminds us that the existing regulations under the Consumer Safety Act 1978 (which I understand is to be repealed) prohibits the supply, new or second-hand, of goods that do not meet the safety requirements of the regulations. I 1054 understand that these regulations will fall with the repeal of the Act. Are the Government suggesting that we go back from a safeguard that existed in those regulations? Much has been said about codes of practice which I do not propose to reiterate. However, I should like to add one point made by the National Consumer Council which I think has not been made in these terms by any other speaker. The document states that if the code is granted formal status, it will assume the importance of delegated legislation but Parliament will not have had the opportunity to discuss in detail what behaviour should, or should not, be lawful in this area. That is an important point, and one against which the Minister will have to argue if he wants to pursue the present provisions in the Bill for codes of practice. We need to have his comments on that point before Committee.
I come now to the power of Customs to detain goods, contained in Clause 31, which I do not think has been mentioned today. The enforcement authorities are still of the view, held since the spring of this year when the amending legislation was brought in, that 48 hours is insufficient time for full inquiries to be made in complicated cases or when action has to be taken at week-ends or holiday periods. During the passage of the 1986 Bill, the Government could not produce any evidence in support of their insistence on the 48-hour period. Is that still the case? Can the Government now produce the evidence that they thought they had at the time? If the Government have it, will the Minister produce it for us before Committee? If not, we shall also be arguing that point.
I think that perhaps enough has been said about compensation. But we should be careful not to make enforcement officers feel that they must draw back when they have a legitimate suspicion because of fear of difficulties if they have suspended the sale of goods for which they are then held responsible.
Finally, a fair amount has been said on the financial and manpower implications. I wish to add, as strongly as I can, some further points. The Association of County Councils, which is a reasonable body not noted for its Left-wing views, challenges the statement in the preamble, as the noble Lord, Lord Ezra said, that the Bill has no financial or manpower implications. Although Part I provides a civil liability and will not be enforced by local authorities, it will lead to increased demand for consumer advice, which can be time-consuming and which trading standards authorities must provide.
Parts II and III will cause extra work and expenditure. The classes of goods covered are widened to cover any goods intended for private use or consumption. That means that many more goods must be inspected and tested by trading standards authorities. It is not reasonable to expect them to take that up in what is, as the noble Lord, Lord Graham, so eloquently said, an already overstrained service.
Part III will also require more advice to be given to traders. It obviously means more work for trading standards officers. When the Government threw in that little statement in the preamble, did they take fully into account the increased load which would be put on trading standards authorities, or are they saying that we are willing to accept a reduced standard from our enforcement authorities? The Bill's success will, in 1055 the long run, depend on enforcement. If the manpower is not there, we may as well not bother. The Government show themselves to be so callous and indifferent to the loads and worries of local authorities that we have reached a stage where, on this Bill, we must be reassured that the Government understand the load that they are imposing. I look forward to hearing about that from the Minister.
Other items need to be discussed but most of them are Committee matters of detail. We propose to raise them then. We wish the Bill well. We want it to go through quickly. We hope that we will receive the right answers tonight so that the Committee stage can be even shorter than it should be.
§ 8.14 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, your Lordships will accept from me that 11 major issues and some 60 points have been raised in this most fascinating and interesting debate. I shall do my best to answer as many as I can. I should like, on behalf of my noble and learned friend the Lord Advocate, to thank all noble Lords who have spoken.
I do not think that I have ever stood before your Lordships as heartened as I am tonight by the general welcome that has been given to the Bill. Many noble Lords have raised specific points, and I shall come to them in due course. I do not recall that anyone has not given a welcome to the general principles of each of the three major parts of the Bill. I am most grateful to noble Lords for that.
Most of the points that have caused concern are in Part I of the Bill. Before going into that in detail, I should remind noble Lords that the purpose of Part I is to implement the European directive; no more and no less. There are a few areas where member states can make choices, but it is right that we should debate them. Noble Lords have mentioned two of them—the development risks defence and the position of primary agricultural products. In other respects, it is not our policy to go beyond the directive. The policy is merely to implement the directive in Part I of the Bill. On Part II, however, where we propose new offences of supplying unsafe goods, and Part III which contains a new offence of giving misleading price indications, we are free to legislate as we choose, having due regard to everything that has been said.
Having made those general remarks, I shall turn to some of the points that have been raised. I shall start with my noble friend Lord Auckland, who as a vice-president of RoSPA takes a good deal of interest in general safety measures. I want to dispel the idea that I think was perhaps lying in his head that the Bill does not deal with toy safety. It does, under the general duties provisions.
I think that it was the noble Baroness, Lady Nicol, who spoke about the toy water snake. That was dealt with by order in 1983 (SI 1366). We had the Expanding Novelty Safety Order (SI 1791) and the Scented Erasers Order (SI 83). Those three matters were briefly touched upon by noble Lords and the noble Baroness, Lady Fisher of Rednal. A good deal of 1056 legislation is in place already. We take what steps we can as soon as we can. The Bill will give enforcement officers a much better chance of stopping such toys reaching the market place.
I warmly welcome the general acceptance of the Bill given by the noble Lord, Lord Williams of Elvel. He made some interesting points. He asked about toy safety. He asked why we had to wait for the EC directive. He suggested that he would not be friendly towards the CBI. I am sorry about that. I do not know whose loss that will be. It will probably be a loss to both parties. He then went on to some points which I liked rather better. He accepted the approach of the Government and the Community to product liability. We shall be talking about the development risks defence in much greater detail. I shall have a little to say about that later.
The noble Lord, Lord Williams, also spoke about primary agricultural products. He asked me about the industrial process and the initial process. On that point I shall reply at the same time to the noble Lord, Lord Morton of Shuna. I say this in the friendliest way. In putting the directive into United Kingdom law, we must take account of the directive's intentions. The intentions were made clear in the preamble, where industrial processing is mentioned. I am sure that we shall return to that point later. The noble Lord made other points to which I shall come in due course.
It may be as well if I deal with the development risks defence straight away to give an idea of our thinking. The noble Lords, Lord Williams and Lord Allen of Abbeydale, and most other noble Lords had something to say on that point. It will be for the producer of the defective product to prove that the state of scientific and technical knowledge at the time he supplied that product was such that no producer of products of that type might have been expected to have discovered that defect. This will not be easy to prove. It will not be sufficient for the producer to point to any testing difficulties he might have encountered, or even that he had complied with national standards or followed procedures adopted by other manufacturers. He will have to prove to the court that he took all the steps that he might reasonably have been expected to take and that the state of scientific and technical knowledge would have allowed him to take. Anything less will not be a defence.
I hope then that this House will accept that, although this subject has attracted controversy, it will not be easy for a producer successfully to plead this defence and that it is not, as some have called it, a significant loophole in this important advance in consumer protection.
A number of your Lordships have mentioned the tragic thalidomide incident; but much has changed since then. Scientific knowledge has increased, and there have been significant changes in the circumstances in which drugs are tested or marketed since the late 1950s. There is, of course, a much wider exchange of information about testing and experiences in the use of drugs. The Medicines Act 1968 now provides for a comprehensive system of licensing under which it is unlawful for a medicinal product to be manufactured, sold, supplied or imported into the country except in accordance with the appropriate licences and clinical trial certificates as to the safety and quality of that product.
1057 The noble Lord, Lord Williams, suggested that, with the inclusion of this defence, the United Kingdom might well become the guinea pig of Europe. I do not believe that this is so. The latest information I have is that most member states will be taking the same decision as us on the development risk defence. We cannot, of course, be certain until all other member states have brought their legislation into force. I understand that only Belgium, Luxembourg and France, where strict liability already exists, may dispense with the development risk defence entirely, and Germany will dispense with it only in relation to pharmaceuticals. It is more likely that, without the defence, British manufacturers would be at a disadvantage in most of Europe.
A number of noble Lords, including the noble Lord, Lord Williams, the noble Baroness, Lady Fisher, and the noble Baroness, Lady Nicol, mentioned the 48-hour detention period.
§ Lord Allen of Abbeydale
My Lords, I do not want to break the thread of the noble Lord but, if he is leaving that point, is he trying to say that in no conceivable circumstances could we have another tragedy comparable with the thalidomide tragedy?
§ Lord Lucas of Chilworth
My Lords, I am quite sure that I did not say that, nor would I dare say that. Although I do not believe that that is a probability, one can never rule out anything.
The noble Baroness, Lady Nicol, said that she would be coming back to the 48-hour detention period. All I would say at this moment is that the detention power is intended to allow enforcement authorities time to make preliminary inquiries about any imports detained. Further action follows from there.
The noble Baroness, Lady Burton of Coventry, whose remarkable tenacity on all consumer matters is the admiration of the House—my noble friend Lady Elliot of Harwood and others paid tribute to it, as I do again this evening—asked me a number of questions. I can confirm that the general safety requirement means that all new consumer goods will be safe to modern standards. I confirm that, so far as the resale of gas and electricity is concerned, we shall be doing something in this direction.
She also suggested that the directive does not fully harmonise the laws of member states. In saying that, of course, she is quite right. However, in the course of the negotiations it became evident that such a system could not be negotiated. The system imposed by the directive is more harmonised than the individual liability systems that currently exist in each member state. The noble Baroness will of course recall that a review is to be undertaken 10 years after the date of notification of the directive, that is, by July 1995.
I referred to the resale of electricity. We intend making regulations, and Part III of the Bill gives us the opportunity of so doing.
If I may return to the noble Lord, Lord Allen of Abbeydale, whom we recall was a distinguished member of the Pearson Commission, I am glad that he gave a general welcome to the Bill. I think that I have said enough about the industrial process and, for the time being anyway, on the development risk. I was 1058 rather glad to have the noble Lord's welcome, so far as insurance is concerned, in support of our position. I hope to return to that matter shortly.
The exclusion of primary agricultural products was brought up by a number of noble Lords, the noble Lord, Lord Williams, the noble Lord, Lord Allen of Abbeydale, the noble Lord, Lord Sainsbury, my noble friend Lord Stanley of Alderley and my noble friend Lady Elliot of Harwood. At the risk of some repetition, the directive excludes liability for primary agricultural products, and the Government are implementing the directive in this respect.
As has been pointed out, some member states may derogate from this provision. The Government, however, have decided not to use it for several reasons. The first is that we know of no other member state that has indicated that it will include liability for primary agricultural products. For us to do so I think would not only fly in the face of our aim of eventual harmonisation, but most certainly would place United Kingdom farmers at a grave disadvantage throughout the Community. There are other reasons. I suspect that we shall come back to this matter later, and it would perhaps be better if I went into detail at that later stage.
My noble friend Lord De La Warr raised a number of points, most of which were answered by the noble Baroness, Lady Nicol. I thank her very much for that. My noble friend asked whether price should be relevant in deciding the safety of a product. The cost of making a product safer is certainly one of the factors that manufacturers might well take into account. I urge my noble friend not to confuse "safe" and "safer" with safety. There is a general duty to ensure that no unsafe goods come to the market. Those who like to go further, of course, can do so.
Let me touch quickly on insurance because the noble Lord, Lord Airedale, the noble Viscount, Lord Hanworth, my noble friend Lord Clitheroe, the noble Lord, Lord Williams, and my noble friend Lord De La Warr also brought it up. I can only say this. Contrary to what my noble friend Lord Clitheroe had to say, all the information that we have on the cost of insurance is confirmed by the recent statement of the Association of British Insurers. That suggests that there will be no excessive rise in the cost of insurance as a direct result of the directive being implemented. This is about the most authoritative statement that we have had on the subject.
We should not confuse our future legislation with the current difficulties of obtaining product liability insurance for manufacturers of products for sale in the United States. We believe that these are caused by the particular vagaries of the American legal system, such as contingency fees, damages, excessive awards and so on. All these factors have driven up the cost of product liability insurance in the United States, but none of these factors applies to the United Kingdom judicial system.
I was rather sorry that the noble Lord, Lord Airedale, at the end of his speech said that he really did not like very much of it at all. I hope that, as he comes to study it in greater detail, he will come to like some of it a little better anyway. I shall seek so to persuade him.
1059 The noble Lord, Lord Gallacher, raised a number of points. I will attempt to answer as many of them as I can. He spoke about Clause 27(2)(a) on enforcement activities, as did a number of other noble Lords. This subsection is in fact in the existing 1978 Consumer Safety Act. It allows the Secretary of State to transfer enforcement responsibilities for specific regulations to other bodies such as the Health and Safety Executive. This would be more effective, for example, for goods largely used at work. However I assure him that there is no intention of removing mainstream enforcement responsibilities from trading standards officers.
The noble Lord spoke interestingly about food coupons, and I should have thought that coupons offering money off the recommended retail price amounted to a price indication and, as such, would be subject to the general prohibition on misleading price indications in Clause 20. I think that is probably the point that he raised in so far as bargains were concerned as distinct from misleading price indications.
He asked, as did a number of other noble Lords, who else other than the Secretary of State can issue a code of practice. While it is possible for someone other than the Secretary of State to prepare a code, it must be approved by the Secretary of State by means of an order and subject to the consultation procedures which are laid down in Clause 25 of this Bill. We see our department writing a code of practice and it being agreed by all the parties to it.
I ought to say something on the code on misleading prices since the noble Lord, Lord Ezra, raised it, as did a number of other speakers. The attempt to include provisions dealing with all potentially misleading price indications would have led to some disadvantage, complexity, incomplete coverage, and so on; also the legislation would have to be extremely detailed if it was to be effective. The code, which has statutory backing as set out in the Bill, will give us the flexibility we need and also allow traders some room to manoeuvre in terms of their understanding.
I would just draw noble Lords' attention to what my noble and learned friend the Lord Advocate said in his opening remarks with regard to codes of practice. I do not think I will repeat them now, since time is so short. There is provision in the Bill for Parliament to have a say in those matters. I think I have answered my noble friend Lord Stanley of Alderley on the question of agricultural products. The noble Baroness, Lady Fisher, indicated to me that she might not be able to stay to the end of the debate. She is, unhappily, not well and has suggested that I should write to her. I will of course copy my letter to the other noble Lords concerned.
I am glad that the noble Lord, Lord Sainsbury, raised a number of most interesting points, particularly welcoming the improvement on the existing legislation. He spoke about the code, as did my noble friend Lady Elliot of Harwood. The code is long, and it is long because it is written in really very simple language, and we believe that it being written that way will help retailers by telling them what they can do to avoid prosecution. It deals specifically with many types of retailer. So far as secondhand goods are concerned, we have first to recall that they were 1060 first-hand at one time. There are particular types of secondhand goods which present real dangers, such as electrical appliances. They are already covered by specific regulations, and where there are particular problems the Government will not hesitate to introduce similar regulations for other types of products—notably gas cookers, to which the noble Baroness referred.
§ Baroness Nicol
My Lords, I am sorry to interrupt the Minister. Is he referring to regulations which will disappear with the 1978 Act?
§ Lord Lucas of Chilworth
My Lords, I was in fact thinking of specific regulations which are now in force, and I should say that the repeal of the 1978 Act—and there is provision in the Bill—will not come about until substitute procedures are in place to ensure that the regulations to which I refer can be made if it is found to be necessary. Perhaps the noble Baroness, and the noble Lord, Lord Williams, would like me to spell it out quite directly, in which case I will write to them.
The noble Lord, Lord Graham of Edmonton, and others, spoke about enforcement. This is a matter on which local authorities should decide their priorities. There are different elements of support which need to be applied in different areas of the country, and it would be wrong for us to apply a blanket imposition. I would remind the House that £68.5 million was spent in 1984–85, and some £71 million in 1985–86. We expect some £77..5 million to be spent this financial year. Therefore, there is adequate money. The Bill certainly will make the work of the enforcement officers a lot easier, and we believe that there will be better consumer protection even from existing resources.
§ Lord Graham of Edmonton
My Lords, would the Minister spell out what he has just said? He says that the Bill will make the work of enforcement officers easier. The Association of County Councils and others have pointed out the additional workload that will fall upon those same officers. Is there to be no consideration of this factor to be taken into account when the rate support grant is struck? Is the Minister really saying that local authorities must determine their own priorities and that in effect they will be faced with either making this Act work or not pursuing other aspects of their responsibilities?
§ Lord Lucas of Chilworth
My Lords, I do not believe that is so. Local authorities have the responsibility of directing their energies to enforcement as to other of their responsibilities as they see fit. This has always been so. What effort they put into the enforcement of trading standards is their business. It varies up and down the country, and it would be quite wrong for me to suggest that any particular level of expenditure should be made out of the total rate support grant or other funding. My right honourable friend will take that into account in fixing the grant.
The noble Lord, Lord Young of Dartington, another distinguished consumer advocate, asked me particularly about the code of practice as regards British Telecom services charged at the M-rate. As I have suggested, the flexibility of the code that we are 1061 proposing will enable us to respond to any new practices that may arise in this direction.
The noble and learned Lord, Lord Denning, gave us an interesting history of product liability, and he suggested that compromise, development risk defence and the agricultural/industrial process is vague. It might well lead to argument. He said that he would be pleased to come back to this point at a later stage.
I turn to the point which the noble Lord, Lord Williams, made in so far as the general safety requirement is concerned, where the noble Lord said that he foresaw some rocks ahead. Those were points which the noble Baroness, Lady Burton, and my noble friend Lord De La Warr also made. That is in Part II of the Bill.
I ought to remind the House of the important differences between Part II and Part I of the Bill. The purpose of Part II is preventive. Its aim is to stop unsafe goods being sold in the first place. Accordingly, it is backed by criminal penalties enforced by local authorities' trading standards departments. On the other hand, the purpose of Part I is to provide compensation.
My noble friend Lord Clitheroe suggested that industry would need a good deal of time to appreciate what was in mind in the Bill. We have made clear that we shall not bring Part I into force for at least six months after Royal Assent. Since the Commission's proposals have been around for some 10 years, there should be no surprises in store for industry.
I turn to the noble Lord, Lord Morton of Shuna, feeling somewhat like a first-year student at his tutorial. A number of questions were asked, and if I come up with the right answers I can move on to term two. The noble Lord raised a number of legalistic points. He knows full well that I have no intention of answering them, even were I totally capable of answering all of them. That is why I look with confidence to my noble and learned friend the Lord Advocate, who will pick up those points and have them dealt with in correspondence between now and when we come to the next stage. However, I should perhaps say to the noble Lord that the question of forfeiture is now part of the Consumer Safety (Amendment) Act 1986. That is consolidated in this Bill.
With regard to the noble Lord's battery, I can tell him that if he bought his motor car in Portugal with a battery, and if the battery caused the car to be defective and the injured person claims against the supplier of the car, then the car is the defective product and Article 9(b) excludes recovery of that cost. Thus the component parts of that product are excluded.
The noble Viscount, Lord Hanworth, raised a number of points, particularly on the financial limit. We believe that setting a financial limit could lead to injustices where there are multiple claims, and to delays in the payment of compensation where there is a possibility of further claims in respect of the same product. Moreover, a financial limit set at the high level required by the directive—something approaching £40 million sterling—would, we believe, have a negligible effect on the cost of insurance for the vast majority of firms. It might even encourage some firms to insure to unnecessarily high levels for their type of business.
1062 I have covered all the 11 issues to which I referred, and a large number of the points that were raised. I shall look very carefully to see what I have left undone that should not have been left undone. I shall write to noble Lords and will ensure that a copy of the letters is placed in the Library.
In conclusion, I should say how grateful I am to noble Lords in all parts of the House who have contributed to our deliberations. I knew that the debate would be interesting and that there would be a good response to the discussion, which has been wide ranging. As my noble friend Lord Auckland said, consumer protection is an ongoing process. However, the Bill is important to industry as well as to users of their products and services. I believe it is right that we should take time to consider its implications in full.
I very much welcome what the noble Lord, Lord Williams of Elvel, said in his remarks. He promised to give an expeditious passage to the Bill but reminded us of our duties as a revising Chamber. I accept that. I look forward to taking up the discussions again when we come to the Committee stage, which I believe is scheduled for the new year. We should therefore come back fairly well charged for the task that lies before us when we come to the Committee stage. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.