MPs warn of "enforcement deserts" in trading standards

November 9, 2011

There are “enforcement deserts” in trading standards where local authorities do not spend enough money to provide an acceptable level of protection to consumers, an influential group of MPs has claimed.

In a report published today, Protecting consumers – the system for enforcing consumer law, the Public Accounts Committee said the level of funding available to different trading standards services varied widely, with some areas having as few as two trading standards officers while others employed more than a hundred.

This resulted in very different levels of coverage in different areas, the committee said. “The enforcement weaknesses in one geographical area risk allowing rogue traders to base themselves there while causing problems more widely, thereby undermining the effectiveness of the system as a whole," the MPs argued.

The MPs also criticised the size of the ‘fighting fund’ established by DBIS to support local authorities that pursue cases of regional or national importance. “At only £250,000, the money available is insignificant in comparison to the potential cost of these investigations,” the report said, pointing out that complex cases typically cost in excess of £200,000.

Taking on enforcement work which has regional or national importance can therefore expose enforcement bodies to considerable financial risk, the MPs concluded.

The committee calculated that individual consumers lost around £6.6bn every year because of the malpractices of traders. At least a further £4.8bn was lost through malpractices occurring at a regional or national level, such as mass market scams, counterfeiting, and unscrupulous traders operating over large geographical areas, the MPs added.

The report also found that:

The enforcement of consumer law cost taxpayers £247m in 2009-10. Local authorities spent £213m of this on the provision of trading standards services, while the remaining £34m was spent by central government to support regional and national enforcement work, including that of the Office of Fair Trading
Despite the high cost to consumers of regional and national problems, it was not clear which of the various enforcement bodies was ultimately responsible for tackling them
The potential profitability of committing an offence can outweigh the maximum available penalty. This means that existing penalties and powers are often insufficient to provide an adequate disincentive to would-be offenders
The Department for Business, Innovation and Skills (DBIS) has “limited understanding” of the true cost of protecting consumers or of the success of existing interventions
The impact of doorstep crime, where traders with no registered premises go from door to door selling substandard or even non-existent services, has not been quantified. This is “despite it being a hugely important and serious issue for consumers which has a disproportionate impact on people who are most vulnerable”
There is no clear and complete information on how much enforcement activity actually costs. “Without collecting better quality information, it is impossible for policy makers to make sure money is focused on tackling effectively the problems that cause the most harm to consumers.”

The Public Accounts Committee also claimed that the approach to enforcing consumer protection had not kept pace with the changing nature of the problems it was intended to tackle.

“When the enforcement system was first established, trading was more localised and consumers tended to lose money through singular instances of malpractice, for example, by being overcharged or sold a short measure,” the MPs said.

“Now, the increase in the number of companies who operate nationally and the trend towards online shopping have caused problems which are more likely to affect consumers on a regional or national level. The system for protecting consumers has not kept up with these changes and is not properly equipped to tackle new problems as they emerge.”

DBIS has recently conducted a consultation on reforming consumer law enforcement. The Public Accounts Committee called on the Department to deliver a system “fit for the modern era”, recommending that DBIS must:

Clearly spell out the obligations and responsibilities of all the organisations involved, ensuring that there is clear accountability and funding for regional and national issues
Ensure that there are robust systems and funding available to escalate cases to the appropriate enforcement body, and that the progress of cases is assured and can be tracked through the system
Put in place systems to ensure transparent monitoring so that citizens can judge whether a sufficient level of protection is being consistently provided to consumers. “Transparent data will help to ensure that gaps in the enforcement system are exposed and tackled”
In reducing non-departmental bodies working on consumer law enforcement (through the abolition of Consumer Focus and scaling down the OFT), ensure that the remaining enforcement bodies have the power, expertise and money to address major and emerging forms of harm
Set out how it will ensure that enforcement bodies are able to pursue cases through the courts where necessary, and are not deterred from taking on large or complex investigations by the costs and risks involved.

Margaret Hodge MP, chair of the committee, described the current arrangements for protecting consumers as “incoherent and fragmented”.

She said in particular that the enforcement system for dealing with scams at a regional level was “inadequate”, with services too poorly resourced to take on the work. “Local authority trading standard services deal with cases within their areas, but rogue traders do not respect local authority boundaries.”

Hodge added: “DBIS plans to abolish Consumer Focus and scale back the work of the Office of Fair Trading. The Department must ensure that these changes do not allow new sophisticated scams to emerge and persist without challenge.”

A DBIS spokesman said: "We recognise the issues raised by the Public Accounts Committee and will take the recommendations on board in the context of ongoing work to protect consumers.

"Our main priority is to ensure that local authorities use their resources effectively to target those bigger scams that affect consumers on a wider scale. Trading Standards have made significant improvements to reduce malpractice but we will work with them to provide more effective national leadership.”

The spokesman said the Department’s new arrangements would establish more clarity over responsibilities and better coordination between enforcers. The results of the consultation will be announced shortly, he added.

Research by the Local Better Regulation Office published in September found that some local authorities were slashing their budgets for regulatory services such as trading standards by more than 30%. The average trading standards budget was down by 11.4%.

This was significantly higher than the 5.7% overall cuts to local authority budgets for service delivery, the LBRO said.

A copy of the PAC report can be viewed here.

Philip Hoult