EMPOWERING AND PROTECTING CONSUMERS Consumer Landscape Review: Impact assessments on Enforcement, Advocacy and Information, Advice and Education APRIL 2012 Contents Consumer Landscape Review: Transfer of consumer enforcement powers.............................................. 2 Summary: Intervention and Options ........................................................................................................... 2 Summary: Analysis & Evidence Policy Option 3 ........................................................................................ 3 Evidence Base (for summary sheets)......................................................................................................... 4 Annexes.................................................................................................................................................... 22 Annex 1: Post Implementation Review (PIR) Plan ................................................................................... 22 Annex 2: Specific impact tests.................................................................................................................. 23 Consumer Landscape Review: Transfer of consumer advocacy responsibilities..................................... 28 Summary: Intervention and Options ......................................................................................................... 28 Summary: Analysis & Evidence Policy Option 3....................................................................................... 29 Evidence Base (for summary sheets)....................................................................................................... 30 Annexes.................................................................................................................................................... 43 Annex 1: Post Implementation Review (PIR) Plan ................................................................................... 43 Annex 1: Specific impact tests.................................................................................................................. 44 Consumer Landscape Review: Transfer of consumer information, advice and education functions ....... 46 Summary: Intervention and Options ......................................................................................................... 46 Summary: Analysis & Evidence Policy Option 1....................................................................................... 47 Evidence Base (for summary sheets)....................................................................................................... 48 Annexes.................................................................................................................................................... 62 Annex 1: Post Implementation Review (PIR) Plan ................................................................................... 62 Annex 1: Specific impact tests.................................................................................................................. 63 1 Consumer Landscape Review: Transfer Impact Assessment (IA) of consumer enforcement powers Date: 1 March 2012 IA No: BIS0267 Stage: Final Lead department or agency: Source of intervention: Domestic Department for Business, Innovation & Skills Type of measure: Secondary Legislation Other departments or agencies: Contact for enquiries: Matt Bowhill NA 020 7215 6445 Summary: Intervention and Options RPC: RPC Opinion Status Cost of Preferred (or more likely) Option Total Net Present Business Net Net cost to business per In scope of One-In, Measure qualifies as Value Present Value year (EANCB on 2009 prices) One-Out? -£3.2m 0 0 No NA What is the problem under consideration? Why is government intervention necessary? Responsibility for UK consumer enforcement is split between Trading Standards (local/regional enforcement funded by Local Authorities and BIS) and the OFT (some national enforcement funded by HMT). An ‘enforcement gap’ has opened up as Trading Standards (TS) tend to focus on local issues while the OFT takes some national cases. BIS has attempted to address this gap by providing funding for regional enforcement activities for specific projects. However a recent report by the NAO was critical of existing measures to tackle this gap. Government has a duty to ensure consumer protection is effective and efficient and proposes to do this by clarifying responsibilities and strengthening national TS leadership. What are the policy objectives and the intended effects? This IA is one of 4 separate IAs that cover the legislative changes involved in the consumer landscape reforms. The objective of the reforms is to improve the enforcement of consumer law, in particular by tackling the ‘enforcement gap’. Robust enforcement of consumer law helps to eliminate rogue traders while rewarding fair-dealing businesses by reinforcing consumer confidence in markets. Successful markets support innovation, productivity and ultimately growth. These objectives will be delivered by clarifying roles and responsibilities, strengthening national TS leadership and equipping it to prioritise and eliminate gaps. What policy options have been considered, including any alternatives to regulation? Please justify preferred option (further details in Evidence Base) The following options have been analysed, relative to a 'do nothing' option (i.e. the OFT, or its proposed successor body the single CMA, retaining the full suite of current OFT consumer enforcement powers): 1 All to TS: All the OFT’s enforcement functions (and funding) transferred to Trading Standards. 2 All cross boundary enforcement to OFT: All cross boundary functions (and funding) transferred to CMA. 3 Hybrid - Rebalancing of responsibilities between OFT and LATSS Option 3 is the preferred option, as it mitigates the risk associated with loss of OFT expertise under Option 1, maintains the value of local authority enforcement expertise (unlike Option 2), whilst providing sufficient resource for national leadership of TS and better co-ordination of national, regional and local enforcement. It is the only option that received acceptance from all key stakeholders. It involves costs but all options do as they involve the risk of some redundancies. Will the policy be reviewed? It will be reviewed. If applicable, set review date: 01/18 Does implementation go beyond minimum EU requirements? NA Are any of these organisations in scope? If Micros not Micro < 20 Small Medium Large exempted set out reason in Evidence Base. No No No No No What is the CO2 equivalent change in greenhouse gas emissions? Traded: Non-traded: (Million tonnes CO2 equivalent) NA NA I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options. Signed by the responsible SELECT SIGNATORY: Date: 1 March 2012 2 Summary: Analysis & Evidence Policy Option 3 Description: Hybrid: Rebalancing of responsibilities between OFT and LATSS FULL ECONOMIC ASSESSMENT Price Base PV Base Time Period Net Benefit (Present Value (PV)) (£m) Year 2011 Year 2011 Years 10 Low: -3.2 High: Optional Best Estimate: -3.2 COSTS (£m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant Price) (Present Value) Low Optional Optional Optional High 0 1 0.385 3.2 Best Estimate 0 0.385 3.2 Description and scale of key monetised costs by ‘main affected groups’ OFT Staff Redundancy or pension top up (£1.74m – £3.1m), transfer of 3 staff pension top up (£240k) cost to Government. Transfer payments and not economic costs hence £0 transition economic cost. On going cost of the Trading Standards Policy Board secretariat (£385k) cost to Government. Additional employer pension contributions (£34k - £450k). Transfer payment and not economic costs. Other key non-monetised costs by ‘main affected groups’ NA BENEFITS (£m) Total Transition Average Annual Total Benefit (Constant Price) Years (excl. Transition) (Constant Price) (Present Value) Low Optional Optional Optional High Optional Optional Optional Best Estimate Optional Optional Optional Description and scale of key monetised benefits by ‘main affected groups’ Benefits are not monetised. Other key non-monetised benefits by ‘main affected groups’ The hybrid option clearly delineates the responsibilities of Trading Standards and the CMA with clear accountability for their respective functions. Via the new Trading Standards Policy Board and regular meetings between CMA and TS it would also set out mechanisms to prioritise cases and for resolving cases which cross the remaining TS boundaries. Key assumptions/sensitivities/risks Discount rate (%) This option carries the least risk as it would have the buy in of LATSS and OFT/CMA. There are some risks regarding the abilities of LATSS to being the large cross cases to plug the enforcement gap but the transfer of funds from OFT and BIS to TS and the existence of the TSPB and should mitigate against this. BUSINESS ASSESSMENT (Option 1) Direct impact on business (Equivalent Annual) £m: In scope of OIOO? Measure qualifies as Costs: 0 Benefits: 0 Net: 0 No NA 3 Evidence Base (for summary sheets) Introduction The consumer landscape reforms 1. This IA is one of four separate IAs covering the proposed legislative changes involved in the Government’s Consumer Landscape reforms. 2. These reforms should improve consumer protection and help and empower consumers. This is critical to ensure that businesses